For many business owners, the thought of selling their company does not come easy.
However, it is inevitable that the time will come when it needs to be considered, and more often than not, the earlier that owners give credence to the idea, the better placed they will be when the time to sell does come.
There are often also misconceptions held by business owners that hold them back from even considering a sale, and I wanted to address a few of these here.
Selling is the end of the journey
Selling your company does not mean that your journey with the business has come to an end.
Quite often, additional value and opportunities can be unlocked through a well-positioned sale and bringing on board a partner that can help to exploit the next stage of the company’s growth.
This can take the form of a financial acquirer, such as a private equity firm, and the additional investment and expertise of scaling that they can bring.
Alternatively, a strategic acquirer, particularly international buyers, may bring new market opportunities and synergies that the business can benefit from.
Process starts when you are ready to sell
It is imperative as a business owner to be aware of your options and prepared for a sale well ahead of when the deal may actually take place.
Firstly, this is because it is important to be able to sell when you want to sell and not when you need to sell.
Ensure you leave yourself with enough runway in your plans with the company that not selling is also an option, otherwise any potential buyer will hold all the cards in a negotiation.
Secondly, you never know when you may receive an unsolicited approach and you may need to react quickly to take advantage of these circumstances.
Preparing for a sale is therefore important for all business owners, even those who intend to continue with the company in the coming years.
Two key areas must be considered in terms of preparation:
- Be aware of the market and what your sale possibilities could be, ensuring that you know whether the unsolicited approach is the best outcome for you and the company;
- Put in place actions ahead of time that maximise the sale outcome. On the latter point, there are many actions that can be taken by an owner that ultimately de-risk the sale for an acquirer, therefore likely increasing value, as well as helping to ensure any process is as smooth (and ultimately successful) as possible.
I only want cash on completion
It is a very familiar story for business owners to tell us that they would only consider an offer that is paid entirely on completion.
The reality is that most deals will contain some element of structure. Whilst there are unfortunate instances where deal structures have penalised sellers, often they are mechanisms that bridge valuation gaps between buyers and sellers.
Structured in the correct way, they can allow sellers to benefit from future performance and growth, and thereby increase the total proceeds available, whilst mitigating the risk for an acquirer of a forecast not being achieved.
Taking early advice is necessary for business owners to put themselves in the best possible position when it comes to considering a potential sale.
Marktlink is a pan-European adviser working with business owners and entrepreneurs on business sales, acquisitions and mergers.
We are holding a free event on Wednesday 18th October at Emirates Old Trafford for owners that may be considering a sale in the coming years and considering the steps that can be taken to optimise the business to be ready for sale.
If you’d like to attend or more information, please contact Gert-Jan van Holten at [email protected]