7.5 min read
Presenting the business to create a “we want, we need” motivation in buyers is essential to achieving the ‘perfect’ sale. Here are our top five tips to positively engage the market.
Selling a business might be the biggest transaction that you as a business leader will ever undertake. The right approach can make a fundamental difference in both the achievement of and optimisation of value. Appointing a quality intermediary who understands you, your business, your sector as well as the technicalities, is a key value-driver when looking to sell.
Employing and then ‘conducting’ the right technical advisors, including accountants and lawyers, is also critical. In any highly technical process, there are pitfalls, which can be costly. By using a quality intermediary with significant expertise and experience will reduce these challenges. It is a common misconception that most sale advisors only work to find the buyer. The right intermediary will manage competitive bids, and the project to reduce your distraction and lead negotiations to maximise value, strategy and deal structure. We strongly believe that lead advisor fees are an investment and should be linked to ‘step’ delivery as the results will outweigh the costs. A strong corporate advisory team and thorough process backed by unbiased, experienced advice will deliver the ‘perfect’ deal.
To secure and realise the best sale value, a comprehensive research strategy for sourcing prospective buyers needs to be undertaken. In deal values exceeding £3 million, the research should be global and the sector should be researched both vertically and horizontally as this approach is most likely to find acquirers with synergy and/ or economies of scale. Furthermore, cross-sector buyers will value entry to a sector and positive disruption in their market. Investment buyers and family offices should also be thoroughly explored as there is currently, an estimated £2.3 trillion of funding in Europe alone looking for suitable investments.
The research process is an ongoing project and will employ a combination of global intelligence tools, tacit knowledge, feet on the ground in the territories and desktop analysis. A good corporate intermediary will lead the process and have important deal information to hand as to who has previously acquired in the sector and who might still be acquiring.
Having researched suitable acquirers, we then start to connect with them. In this respect, we only make discreet approaches to the senior decision-makers and leaders. Confidentiality is paramount, and your company’s identity is withheld until a Non-Disclosure Agreement (NDA) is completed. The initial approach is made using a top-level, anonymous executive summary, followed by a professional discussion on the benefits of a potential acquisition.
Listening to the market is key. During the research and approaches, it is vital to uncover what is motivating potential acquirers. The process is iterative in assessing and analysing response and adapting approaches accordingly. Approaches may also be bespoke depending on target type and sector. Virtual presentation meetings should be encouraged but only after the buyers have qualified their review of the marketing data room. Distracting owners and managers in a sale process is a real risk, therefore key meetings are the focus.
As well as many types of exits there are also many types of buyers. Being able to understand the best type and the approach of each is important when assessing the potential transaction and how to handle negotiations to secure the ‘perfect’ sale. Each buyer type, trade, cross-sector trade, investment or entrepreneur will have different characteristics and therefore require different approaches. There will also be pros and cons to each type for your individual business.
Whilst the trade buyer with a ‘we want, we need’ motivation, that secures economies of scale, synergy and shareholder value will always be the highest initial bidders; investment buyers have become far more interesting in recent years, often with values on a par. Additionally, by you potentially retaining a stake and carrying out a partial exit you may secure a significant elevation to the value of your business over time. On this basis, you may actively seek and embrace an elevator deal. Advice on whether a management buyout or employee ownership sale is appropriate may also be relevant to the ‘perfect’ sale.
Confidentiality should be carefully managed, and buyers vetted and assessed in detail. All information flow should be focused and relevant. Whilst a comprehensive marketing data room is vital, key data such as employee schedules and customer names will be redacted. Different buyers will have different motivations and will invariably ‘value’ a business differently, both financially and in the perspective of what it is truly worth to them. A strategic buyer who is securing the four corners of M&A – shareholder value, positive disruption, synergy and economies of scale, will attach a greater value.
We study in-depth the motivations of each prospective buyer and present the selling benefits of your business to them on a bespoke basis. When entering discussions, it is of key importance to have a clear real-time position on your company’s performance. Together with realistic forecasts and a demonstrably feasible business plan, ideally that can be tweaked to incorporate the interests of different buyers. Buyers want growth and being able to demonstrate your business’ prospects, backed by research, will drive buyer motivation. Having a clear growth plan, that is achievable, also creates leverage. You want to demonstrate to buyers that the value is only going to go up and that you are in a position to choose if you want to do a deal or retain and grow the business.
In week 3 of our “Perfect “Sale, we examine how best to create competition and multiple bids for the business. If you would like to discuss in confidence any aspect of our services or for advice, please call 020 7788 8250 or see www.avondale.co.uk.avondale
If you would like to discuss in confidence any aspect of our services or advice please contact us on +44 (0)1737 240888 or email firstname.lastname@example.org.
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