For example, if the company operates in an industry controlled by 4-5 large players, a business combination would make sense for securing larger market share, which would lead to greater pricing power and improved cash flow for the combined entity.

In cases when the company is largely owned by the founding family it is imperative to grasp how both business and ownership succession are being planned (or not) in preparation for a triggering event. If such an event occurs then there is strong likelihood for a major shuffle in ownership, either within the family or with outside strategic partners who may want increased influence for an eventual takeover.

By understanding the dynamics of such event-based optionality and by developing insight into the various outcome scenarios, we as shareholders can secure a position of influence if/when such an event occurs – in addition to owning a stake in a valuable business at a significant discount.