As specialists in selling companies and making acquisitions, we were asked to contribute to a recent feature in CityAM, London’s leading free financial and business newspaper, with a daily readership of over 275,000 professionals:
To achieve the highest valuation when selling a business, an owner must plan for and address early on any potential issues that might deter would-be buyers.
For example, make sure key contracts are up-to-date and signed, and that you don’t have a big renewal or renegotiation coming up. Key employees should be incentivised and locked in – not with vague promises, but properly-documented bonuses or share options. Some of this might require re-writing legal agreements, which takes time, so start early.
Any owner who wants to leave once a deal is completed must demonstrate that there is a strong management team in place. Finding and recruiting good people can’t be done in a rush, so early preparation is key.
Ideally, an entrepreneur should start talking to a corporate financier perhaps two years before they intend to sell – not necessarily formally to appoint them, but to start the dialogue. Building this relationship means entrepreneurs are kept informed of the M&A trends in their sector, what’s hot and what’s not, and can benefit from experienced advice on potential issues and obstacles to a sale.
M&A activity has slowed over the past few years, but good deals are still being done. This means that it is essential for SMEs to be well-positioned and well-prepared. Strong and exciting businesses are still in demand and securing high valuations, but purchasers are looking for companies they must have rather than those they’d like to have. For businesses which are under-prepared and poorly-positioned, there might not be a buyer at all; but for strong and attractive businesses, acquirers aren’t bargain-hunting – they’re willing to pay full value.