April 2024

By Michael Collins, Managing Principal, EquiNova

M&A people have a reputation for being numbers nerds. They love comps and KPIs and loads of other data points that, like a Georges Seurat painting, merge into a picture. But the trouble is that those numbers sometimes get presented in a way that don’t reveal the real story. This is one of those years when that problem is especially true.

M&A people have a reputation for being numbers nerds. They love comps and KPIs and loads of other data points that, like a Georges Seurat painting, merge into a picture. But the trouble is that those numbers sometimes get presented in a way that don’t reveal the real story. This is one of those years when that problem is especially true.

In coming weeks, you can expect to see some of the first detailed reports on how lumberyards and specialty dealers did in 2023. Presented without any context, many dealers’ numbers will look horrible. Double-digit percentage revenue drops will be common. You know there’s a reason why this has happened: Lumber’s 48% price drop over 2023. Without that particular number, you can’t understand any other. But people who are thinking of putting money into lots of different industries might not understand your recent history as well as they should.

That’s why it’s particularly important to be able to tell your story, in both numbers and anecdotes, to help outsiders understand why you’re worth the investment. This is the year to show your performance in terms of volume as well as revenue. It’s also a great time to explain how you foresaw commodity prices would fall and what you did operationally to absorb the blow. How did you use the windfall from the previous year’s sharp rise in prices to improve your business? How did you then stay profitable in 2023 even as commodity revenues shrank? By offering newer services or instituting efficiencies, perhaps?

Investors always want to know how you weathered storms. Typically, the response was triggered by a sudden disaster, such as a fire, a leader’s death, or the onset of COVID. In contrast, last year was more like a drought, in which the price dried up even as the thirst for lumber held steady. That’s a different kind of challenge, but your story about how you responded is just as worthwhile. And numbers alone can’t tell it.