The ongoing uncertainty surrounding the outcome of Brexit has led many of the UK’s growth businesses to reassess their exit options.
Some are tempted to sell to domestic buyers that are looking to consolidate or expand in their home markets ahead of Brexit, while other business owners are considering taking advantage of the fall in Sterling – which is likely to be only for a limited period while economic uncertainty prevails.
Consequently, many business leaders have sold, or are exploring exit avenues, to ensure that they get the best possible deal.
Findings from entrepreneur community, The Supper Club, support this. The membership community of founders and CEOs of high growth businesses, reports that the total value of member exits in the first nine months of 2017 stood at a surprisingly high £1.2bn, and ranged from management buyouts to trade sales and private equity investment.
British businesses that are looking to exit should take all of the steps they can to ensure they are as attractive as possible to buyers, both domestic and foreign. Below are five recommendations from some of the UK’s leading business leaders on what to consider when selling your business.
Caroline Belcher, partner at Cavendish Corporate Finance
Identify your ideal buyer early
“It is advantageous to think about the ideal potential buyers for your business well before a sale process as this will enable you to position your business in the best way possible to attract the target buyers. The ideal acquirer who will pay the highest price for your business is typically a ‘strategic buyer’, for example a company that is considering buying a business to expand internationally or to sell your firm’s products through its existing distribution network. The greater the insight you have into a buyer’s motive for purchasing your business, the easier it will be for you to attractively position your company for that buyer and maximise the price you achieve.
To identify this type of buyer, look at competitors, equivalents to you in the US and other geographic markets, companies selling related products or services or vertical integration plays. There is a particular benefit in identifying overseas acquirers as they will often pay a premium to enter new markets.”
Olly Olsen, co-founder of The Office Group
Prepare your business for approach at any time
“There’s always an element of luck with the timing, but if you don’t prepare your business for sale you’re less likely to achieve the maximum value when an opportunity comes along.
“I think it’s important to seek advice from people who have been there before and sold a company. And when you’re working in partnership with someone else, make sure you’re clear from day one how far you want to go, what your vision might be, and at which point a sale could be considered.
“It’s a good idea to get your housekeeping in order along the way, such as data and other financial information. It will make things much smoother when the deal is done.”
Lara Morgan, founder of Pacific Direct
Know when to walk away from the deal
“It will be easier to manage the stress of selling if you understand your sale threshold and know when to walk away. Do not go into the stress of an exit without absolute clarity around your own terms and conditions of the deal.
“Have a BATNA (best alternative to a negotiated agreement) and write down the key terms that you personally will accept before walking away. Bolt the value to the floor for maximum return. Licenses, contracts with decent term time left, staff with good contracts, and all other assets must be secured. Do not leave these difficult conversations with people too late, do not be having them whilst you much be utterly focused on the hardwearing, relentless due diligence process that is the critical part of a happy exit.”
Michael Kraftman, CEO of Vision Direct
Get the right advisors in place
“The best advice more than paid for itself in the capital value uplift or avoided pitfalls. Although our business wasn’t for sale, when we got approached we immediately got advisors to work with us (a boutique M&A firm).
“We paid them substantial fees, but definitely got a huge amount of value from them. I would highly recommend that anyone in the same position gets themselves a good adviser.
“We’d met this broker before, and they are very tightly focused on our sector. They knew our buyers very well which was absolutely invaluable for us. Once we got started we did turn it into a competitive sales process – invited other bids and so forth.”
Alex Farrell, founder of IT Job Board
Have a succession plan and senior team in place
“To instil confidence, particularly with private equity or an initial public offering (IPO), your executive team must have the credibility, skills, and day to day responsibility for running the business.
Buyers and their advisors will want to be reassured that they have been doing it long enough that they will not miss a beat with a transfer of ownership. If it wasn’t clear the business could continue successfully without me, it would have put the sale at risk.
“I brought in an external coach, who helped me see where each individual could develop and I encouraged them to work together without relying on me. By relinquishing control, I created a more collegiate atmosphere in the business.”
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