In partnership with
Selling your business is likely to be one of the biggest decisions you may ever have to make, both emotionally and practically. It marks the start of a great journey that potentially leads to fantastic new opportunities - professional and personal. Given its importance, we really wanted to understand more about what “an exit” really means. So we gathered together a group of our clients, who are entrepreneurial CEOs and asked them what advice they might have for others considering making the leap. Here are some of their valuable insights.
What comes first?
“When you sell, you have to be prepared” confirms Peter Welch (former owner of Meridian Cost Benefit bought by Glantus Plc, a key player in data analytics and cost control, who now enjoys time with family and achieving his golfing goals). “Make sure your financials back up the story you are telling. Inconsistencies can alarm a buyer and put them off. So know your numbers inside out.”
Alan Lorrimer (CEO and founder of The Piano Works and veteran of 20 start-ups and exits in the hospitality sector) stresses the importance of considering what the Buyer is looking for. “You have to have at least industry norms of profitability and a key point of difference. As an owner, clearly articulate your “sizzle” to the buyer. This is the key ingredient that will make your business attractive”. He adds, “Not all businesses can secure multiple offers, so where you have found an acquirer, make them feel special and work hard to understand their needs and motives”.
Will a great “tech stack” (multiple integrated IT solutions) help you stand out and increase your value?
Rupert Ashe, CEO of D5 Capital who has counselled hundreds of would-be sellers on share sales and has exited his own businesses, is sceptical. His advice is “Keep your emotions in check. Don’t get delusional about what your business is worth. Too often sellers try to achieve unrealistic multiples”. In his opinion, going to market with the right valuation can be the difference between locking in a potential suitor quickly and wasting time on conversations that simply don’t go anywhere.
So you’ve found a buyer - is that the deal done?
Alan looks at the sale process in terms of athletics. “Running a business is like the hurdles; constantly overcoming a series of challenges. Selling your business, however, is like the pole vault; scaling an almost unimaginable barrier”. He was keen to point out that with the right support, it can be done. But it’s a process not without its risks, he warns.
Rupert Rawcliffe of SRC Corporate Finance agrees with this view.
What could trip you up?
Peter stresses, “Your policies, procedures and contracts don’t have to be perfect but make sure they have been reviewed before you start due diligence (the buyer’s investigations on your business) so that there is nothing that’s going to alarm them.” Rupert agrees: “A buyer doesn’t like surprise disclosures and can use these to your disadvantage especially if any come up at the last moment.” Alan, however, feels strongly you could go much further and it’s never too early to start getting things in order. “Make sure your paperwork is unassailable. You don’t want to find out there is a defect in your business mid-way through the sale process. When you are starting up don’t be tempted to cut corners and take shortcuts as they will cost you dear later.” He should know, after his double-digit disposals.
Role of advisors?
All agree that good advice can help to solve difficult issues. “When the going gets tough in negotiating the SPA (share sale and purchase agreement), which it will”, Peter reflected “you need your advisers in your corner to be solution focussed. Make sure they solve the problems as they come up and do not create more.” Alan agrees, but goes further saying “At all costs avoid point scoring, particularly over the warranties and indemnities (the seller’s guarantees to the buyer). Nothing can kill the goodwill and rapport between you and the buyer quicker.” Controversially, but honestly, he added, “Don’t get them (the lawyers) involved too early!” By that, he means, before heads of terms (summarising the initial structure of a deal) are agreed. “You need to work hard on building that rapport with the buyer before getting too focussed on the detail, as it’s the strong relationship between you and the buyer which will carry you through to the finish line.”
So what are the “takeaways” from our seasoned experts?
- Plan carefully, making sure you present your business effectively and accurately and remain rooted in reality about what you hope to achieve.
- Don’t underestimate what’s involved. While it will be difficult, if you’ve anticipated likely problems and deal with them sensibly, you can steer your way to the end goal.
- Take good advice that focusses on fixing any problems and don’t unpick the carefully built relationship between you and the buyer.
If all goes according to plan then you too can achieve a successful exit and make sure a buyer will be delighted to purchase your “sizzle”. Then you can look to new horizons and adventures in the days to come.
Interviewer: David Gordon Corporate Partner, London
Interviewees: Peter Welch, Alan Lorrimer and Rupert Ashe
Healys’ Corporate and Commercial team have helped literally hundreds of business owners sell, and we have advised on a huge range of deals across a broad range of sectors. If you are an owner considering the next step in your business journey, we would love to talk to you. If you would like to talk to us about any of the issues raised, please get in touch by emailing enquiries@healys.com or call us on 020 7822 4000.
