The M&A market is continuing to improve for business owners looking to sell their company. However in order to optimise value and minimise the risk of a failed sale process, forward planning is essential.

Andy Moore, Managing Director of Bracebridge Corporate Finance, gives some essential advice and tips for business owners considering a sale.

In simple terms, exit planning involves four key elements:

  • Developing a clearly defined growth strategy
  • Knowing your exit route
  • Making your business more attractive
  • Identifying potential sale issues

Achieving all of the above cannot be done overnight. You need to plan well ahead and give yourself sufficient time to do the things that will make a difference, and this should be at least 12 months, if not longer.

Developing a growth strategy

Most business owners will say they have a strategy, but can they answer the question – “Where do you want to be in 3 to 5 years time?” It is essential that you take a fresh look at your business strategy and identify growth opportunities. The key to a successful sale is being able to demonstrate to a purchaser that the business will continue to grow and the management team have a clear view where this growth is coming from. But this is not just about having a plan. It is about living and breathing the plan and making sure your management team are starting to deliver the plan. The earlier this plan is defined and documented, the better. Otherwise, the buyer will simply focus on the historic performance of the business, not the future opportunities.

Knowing your likely exit route

Are you looking for a 100% sale to a trade purchaser? Or would you consider selling to your management team? Alternatively, you may consider a partial exit now (often referred to as a “cash-out deal”), whilst sharing in some future upside.

If a sale to a trade purchaser is your preferred option, you then need to ensure you have a view on the likely purchasers. This is an essential part of the exit planning process – knowing who is most likely to acquire your business will give added focus to your exit preparations. For example, there is no point in pursuing a diversification strategy that would not sit comfortably with your most likely purchasers.

Making your business more attractive

This is not simply a case of refreshing your website or redecorating the reception area! There are many things that can be done, both internally and externally. This is about raising your profile in the market and punching above your weight. You should consider stepping up your PR and marketing activities.

Internally, it is about having structures, systems and procedures in place. For example, does the business rely on you? Or do you have a strong team in place already? This is a critical area that should be considered well ahead of a sale.

You should also take a look at your financial reporting procedures and make improvements where necessary.
These are just a few examples of things that can be done, given sufficient time.

Identifying issues

Every business will have its own complexities and issues which could impact upon a sale. The earlier you start addressing these issues, the smoother the sale process will be.

For example, if you own a business which has significant intellectual property, we would strongly recommend a thorough review of the status of your IP. This involves looking at the legal ownership, the robustness and the validity of the IP.

If you are involved in a manufacturing business, are there any environmental issues which you are concerned about?

Similarly, anti-bribery policy is a key issue. Are you compliant?
These are just a few examples of issues, which if not addressed early enough, can stall an otherwise successful sale process.

Timing of sale

Whilst preparation is key to a successful sale process, timing is everything. You should keep in mind the wider economic environment, the current performance of your business and importantly factors that could impact on the timing from a purchaser’s perspective.