Whatever your reason for selling – whether due to retirement, a change of management or a straightforward desire to cash out – many of the same principles apply. Although you will be thinking about getting to the point of sale, it is crucial to prepare carefully. The ability to extract maximum value from a sale is determined in the early days of planning:
- Have you considered the optimal tax structure;
- Are key employees incentivised;
- Are contracts appropriately documented;
- Are there any contingent liabilities;
- What is the best way to present your business.
The list is endless and this is where advisers often add most value
You may not have a clear idea of who you want to sell to, where to look for the best investors, or even which country to start the search in. Do you have a list of targets? How long is that list? Your adviser will help you there. If you appoint an experienced and knowledgeable adviser early on, you maximise your chances of achieving the best value. And a sound and watertight plan will put you in good stead for any unanticipated challenges.
As an entrepreneur, you know your firm inside out. This means you may fall into the trap of over or underestimating the value of your company. Your adviser will spend time and effort getting to know your business, and will ensure it is realistically and attractively priced.
But make allowances for the process to move more slowly than you may have expected or indeed want. Rushing into a deal is unlikely to be a prudent course of action. For most buyers, M&A is part of a calculated strategy of growth requiring time, careful thought, working capital and manpower. It is important to accept this at the start and to have patience.
Planning the exit strategy
You have taken the first step towards selling your business and now the work starts in earnest. A diligent approach is key, not least when it concerns the tax implications of a deal. Tax advice early on is essential. Then there is the long and laborious process of collating detailed management accounts and information, ensuring staff contracts are in place, deliberating over incentive schemes for key employees. Ask yourself, are your forecasts robust? In some instances, preparing for sale takes longer than the sale itself but, if you don’t get it right here, you will jeopardise your prospects down the line.
Fundamentally, you’re selling the future to a potential investor. While you will probably be keen to stress this point, most buyers look at past performance when determining a purchase price. Yes, they will want to predict how your company is going to perform in future years but, in the buyer’s mind, the value comes from the existing business. In this respect, your understanding of your firm’s culture, staff loyalty and spirit will be an important factor.
Once an offer is agreed, the intensive element of the due diligence process begins. This takes considerable skill and can eat up months of intense analysis of your firm, including scrutiny of your financial data and operational assets. But your adviser will walk you through what is happening – and this is where your thorough and dedicated preparation will pay off.
At the end of the day, what you are really seeking is a bespoke solution for the sale of your company. Panmure Gordon can provide that, and our breadth of expertise means we will offer options you may not have considered. You don’t have to sell to a direct competitor. It may be that a strong management team wishes to buy the company backed by private equity or perhaps you simply require some growth capital. Maybe your business is ready for IPO. You should consider all options carefully before pressing the button on a sale.
At Panmure Gordon, we work with companies from all walks of life and are expert at creating bespoke solutions to match each client’s needs. If you’re thinking about selling your business, call us now on +44 (0)20 7886 2500.