A range of company owners, from all different industries, recently came together as part of the first episode in Biramis Management Partners and ByrneWallace LLP’s webinar series around maximising value from exiting a business.
After much discussion, all participants agreed that – if they had the chance to exit again – they would do a number of things differently.
The most prominent of these things was around bringing in an external adviser and the immense value of this. Ronan Byrne, who has built up and sold three businesses to large, multinational companies over the years, was the first to mention this.
Commenting on the planning aspect, Ronan said: “When in the throes of setting up a new business, and getting the ball rolling, the last thing most people are thinking about is leaving it. But that’s your first mistake made.” He went on to refer to company structure as one of the key things business owners need to consider from day one – ensuring it is set up in a way that enables you to exit and provides as smooth of a transition as possible when the time comes.
Valerie Moran, who owned leading fintech provider Prepaid Financial Services with her husband before exiting in 2020, echoed Ronan’s thoughts. She told the panel that knowing they were going to sell right from the start was the best move they could have made.
Because of this, they introduced a share scheme where all employees could buy into the business when they joined and would benefit from the sale when it eventually took place.
She knew that, by taking this route, the company would retain its talented employees and expertise within the business and undertake a seamless change management process. However, she wished someone had told her about the importance of having her house in order too, and how incredibly important this is when selling to a listed company.
Stirling Austin, who founded NIM Europe Management – an Interim Management company, added that an adviser is also invaluable when beginning to think about exiting a company. He said this is especially the case when the business operates in as niche of an industry as his did.
Stirling turned to an industry peer who he trusted and respected for advice but revealed that the process felt very “lonely” without an official external adviser on board to help. He planned for an exit from the get-go and conducted a very thorough screening method when seeking out a buyer – which involved proactively approaching individual businesses that he thought would be interested, asking them to sign an NDA before speaking and discussing the opportunity to take on a company that had already gone past its tumultuous “3-year syndrome” – but still felt overwhelmed.
He struggled to benchmark his business against others and pinpoint its true value. Questions like ‘is its value relayed to the gross profit or the turnover?’ and ‘does it include me and what I’m worth?’ came to the forefront. Interestingly, he also emphasises the need for an objective point of view – saying that, as the founder of a business who grows it from scratch, it’s impossible to be emotionally unattached and not hold a bias in your estimations.
Valerie noted here that it’s almost a translation exercise too. With the various approaches and calculations being so complicated, especially within the earn-out route she took, only someone who dedicated their entire occupation to understanding it could wrap their head around the meaning and implications. “It’s simply not your field”, she said, “there will be things you do not understand, and need putting in layman’s terms”.
Aside from the logistical side of a business exit, there is also a huge need for effective people management too – as Michelle Walshe, who took up the mantle of Managing Director in her family business, expands on.
M&M Walshe Group was set up by Michelle’s grandparents in 1979. Under Michelle’s leadership, M&M Walshe Group underwent rapid expansion, and became one of Europe’s largest sous vide specialists. But, when her father and aunt voiced how they wanted to retire, Michelle knew it was time to sell.
However, with so many different people’s opinions to consider and the relationship being more than just a working one, Michelle found it was difficult to separate the personal from the professional. “There’s so many different things for all family members to think about and be on board with,” she said, “like ‘when are we selling?’, ‘what approach are we going to take?’, ‘what kind of organisation do we want to sell to?’, ‘what kind of outcome would work best for each of us?’, ‘who will advise us?’ and, ultimately, ‘who will take up the helm and lead the sale?’”.
Before the webinar drew to a close, Ronan had one last thing to add: “Just because a sale is agreed, it doesn’t mean that the job is done”, he said, “in fact, you’re only halfway there”. He revealed how there’s nearly always hurdles, and that so many things can change in one month – let alone six months to a year.
For example, Valerie and her husband took five years finding the perfect buyer for Prepaid Financial Services and coming to an agreement in terms of valuation and approach, only for COVID-19 to come along which led to the deal falling through completely and discussions starting from scratch again. Michelle’s business faced similar hurdles during its sale, with swine flu hitting the pork industry followed by Brexit and COVID-19 meaning that she had to rethink and re-evaluate numerous times.
Ronan summed up by emphasising how a sale needs to be “driven to the end”, and that only a specialist adviser will have the patience, determination and know-how to see this done.
Biramis Management Partners’ next webinar in the series, which is taking place in partnership with ByrneWallace LLP and supported by BusinessCloud, will cover ‘Maximising value from your MBO’. It will take place on Thursday 25th March, and can be booked onto here: https://biramis.com/webinar-2/.