Over the past couple of years, I’ve been working on the sale of a business. I’ve been keeping notes throughout, to share the lessons learned.
It’s all happening as I write. To avoid unsettling the staff before we actually have an agreement in place, I’ve changed all the names involved. (There’s also the small matter of alerting the acquirer to our innermost thoughts.) But, putting all this aside, the details are unadorned real life.
I worked in corporate finance in my early working life and two of us saw an opportunity to create a niche offering and set the business up in 1999. It worked.
We re a service business. We ve been around since 2000 and grown 15 to 40 per cent per annum until 2008. We lost 25 per cent of turnover by 2010 and now are back up to pre-recession levels. The purchaser’s agent (of whom more later) saw this trend as an essential pre-condition. Everyone is going to suffer in this climate. It’s only when you are back on the growth path that people will believe your forecasts.
Our reason for selling is that we won’t be around forever. It’s in everyone’s interests that the business becomes part of a larger organisation because then it will survive, and grow.These are our underpinning principles:
- We are a great business that is up for sale. We’re not a distress sale.
- We will look at any offer for our business, Metaphor Ltd, of five times its maintainable earnings over the next four years.
- We will stay around as long as the purchaser wants.
We have nothing to hide, no skeletons, no bad deals no litigation, no tax problems.
In terms of structure we are halfway between a company and a partnership. The legal structure is a company and senior people have shares so as to share in the success of the business if and when we sell it. Only the two founders have voting shares because we believe in benevolent dictatorships rather than partnerships, which can become sclerotic. The only problem is that only voting shares get Entrepreneurs” Relief.
In my view, the only company that can be sold is a good one. Bad ones may get taken over but no-one pays serious money for them.
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