Why Two Companies in the Same Industry Get Wildly Different Price Tags

Prompted by “Here’s why some US industrial companies achieve higher multiples”, McKinsey.

McKinsey studied 163 large industrial companies and found something counterintuitive: being in a hot market barely predicted who got the valuation premium. The companies that actually expanded their multiples combined several moves at once — new products, new markets, M&A, and cost discipline — not just one good idea executed well.

Their sharpest finding: doing more things isn't what mattered. It's that the strongest performers could show real operating results behind every move — revenue growth, margin expansion, a cleaner portfolio — not just an announcement. A portfolio shift or acquisition that doesn't show up in the numbers doesn't move anyone's opinion of the business, public market or private.

What does a buyer see in your business?

This is exactly what a buyer is looking at when you eventually sell your company, whether or not you've ever thought in terms of "multiples." The owner who's only ever run one lever at a time — just cost-cutting, or just chasing one new customer segment — ends up with a business that looks like what it's always been. The owner building real exit value is usually running two or three of these moves simultaneously and can actually show the results, not just describe the plan.

Test it out: list the 2-3 things you're actually doing right now to grow the business — not plans, things in motion. For each one, ask: do I have a number that proves it's working, or am I just assuming it is? If you can't point to the number, that's the gap a buyer (or you, honestly) would catch first.

Lining up growth moves you can actually prove is core to Strategic Advisory.

Looking for a place to discuss issues like this with other local business leaders? Join one of our no-cost Rochester CEO insight sessions and test your ideas with your peers.

Originally posted on LinkedIn ↗