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British businesses should look abroad when considering a sale

6 min read

07 April 2015

With the UK remaining one of the world's most attractive destinations for international investors, Lord Leigh of Hurley, Cavendish Corporate Finance senior partner, looks at why it is an ideal entry route into the European market for overseas companies.

Last year we saw global M&A activity reach its highest level since the 2007 financial crash – and European inbound deals, predominantly from the US, achieved record highs. 

We also witnessed an increasing flow of M&A interest from Asia, in particular Chinese buyers which accounted for 79 takeover deals in Europe last year. Notable transactions included Sanpower’s £480m takeover of UK department store chain House of Fraser and Hony Capital’s £900m acquisition of restaurant chain Pizza Express. 

However, despite this upturn, UK domestic deal volumes fell to their lowest level in the past seven years and as a result, there has never been a more crucial time for British businesses to look abroad when considering a sale. 

Here’s how I think British businesses can best position themselves to attract international buyers. 

Be organised from the outset 

Preparing for a sale inevitably takes longer than you initially think so give yourself plenty of time to prepare – a minimum of 18 months is ideal – and conduct a full review of your company at the outset. Ensure you don’t let a personal attachment to your business cloud your judgement and take a step back to review your business objectively. It is crucial to ask yourself the questions that a prospective buyer might want to know: are there areas of your businesses that are not performing at their optimum and how might you address these issues early on?

Fast and effective actions to correct any problem areas at the outset can help boost your exit multiples and avoid any difficulties later on in the sales process. 

Know where to find your buyer

Whilst it’s important not to narrow your “buyer search” unnecessarily, understanding the current trends in M&A can help you to identify the key markets where potential buyers are likely to originate from. 

For instance, whilst US buyers were responsible for about half of all foreign acquisitions of UK companies in 2014, and have been renowned for targeting some of our fastest growing tech startups, in Western Europe we saw the total value of all deals double last year compared to in 2013. 

Recognise that overseas buyers come in many different sizes, all the way from the biggest players to mid-market businesses looking to expand through acquisitions, so be open to different prospects. 

Understand your inherent value

For many overseas buyers the UK provides the ideal platform to expand into the European market and as a result many international companies are willing to pay a premium for British businesses. 

To maximise your exit multiple understand what aspects of your company a prospective buyer is likely to value most and learn how to best highlight your unique selling points. For many international buyers brand reputation in the UK and domestic market share is of upmost importance, so whilst it may be tempting to expand internationally and increase the breadth of your operations, remember to focus on your home market. 

Read more about selling your business:

Be sensitive to cultural differences

Corporate cultures vary considerably from country to country and being aware of these differences is fundamental in ensuring a smooth sales process. Once you have identified your buyer, consider adjusting your sales plan to ensure your processes, time scales and expectations are in line with that of the other party. Failing to make such changes can be hugely detrimental to business relations and can unnecessarily slow down activities on both sides. Sometimes it can also be advantageous to propose a transitional period where both companies work together to ensure a smooth merger and to acclimatise employees and shareholders to the new ownership structure.

Keep your eye on internal operations

Whilst your company sale is of the highest importance, losing sight of your business operations can be extremely damaging to any potential sale. Ensure you continue to focus on your company’s performance but remember that the sales process does require time and dedication to maximise results so set realistic targets to avoid falling short. After all meeting or even exceeding achievable targets appears far better than failing to meet overly ambitious ones. 

Finally: Seek advice 

Desk research can be limited and when navigating unfamiliar markets obtaining detailed information and local insight will normally require specialist advice. Appointing an adviser with international reach is crucial to ensuring you get access to a full range of potential buyers, and ultimately will help you maximise the value of your business on exit.

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