for sale
Several of you have asked me of my experiences in ‘selling out’ (business wise as opposed to personally or politically!) and in putting in place an effective ‘exit strategy’. Surprisingly perhaps, since 2008 there’s apparently a bit of a build up in the backlog of acquisitions and mergers and, rumour has it, there are a large number of corporate organisations, private individuals and equity firms that are sitting on piles of cash with an itchy trigger finger. However, it’s not every day you sell a business and understandably, when things are unfamiliar, mistakes, sometimes expensive mistakes, can easily be made.
The first thing to say is that I do not believe you can build an organisation that will ultimately achieve its full potential if you’re focussed on your own exit too early in its development. Growing such an entity, and one which ultimately will be attractive to someone else, needs to be your predominant focus and concern. However, given the almost Herculean effort that most entrepreneurs put into building their businesses, it’s surprising how many fail to plan for a successful exit, successful both for themselves and their business.
Serendipity often plays an important part, with many business owners accepting apparently flattering or friendly offers without truly bothering to actually market their businesses. This isn’t necessarily a bad thing but a level of analysis and understanding wouldn’t go amiss to ensure all parties know what they’re doing and getting into. I have to admit that this was really the case for me and mine, where I actually gave away 50% to two key employees but with my buy-out conditions clearly and precisely outlined and understood. Spending time searching for and getting to understand any non-obvious potential buyers (along both the vertical and horizontal axis) can also be invaluable in helping an owner understand his organisation’s position and worth. Being prepared for a sale or exit should be about running your company on the right footing in any event. Get your contracts signed, ensure the key staff are employed on the right terms, play the bad-guy in credit control and focus on cash-flow, work on the future pipeline: in short, show everyone you and your business are in it for the long-term and don’t intend to rush any decisions.
It’s entirely understandable that during any sale or merge process an owner can become a little distracted, taking their eye off the revenue-ball and, worryingly, see a trading decline, which could result in a lower sale price. The key is be slightly ahead of the game, being on top of the numbers, being transparent in terms of the business’s assets and worth and to maintain trading at a high level. Being transparent entails pulling all the important elements such as leases, asset registers, insurances, debt, staff, contracts, future product strategies & developments, accounts and business plans, together and placing these visibly for potential buyers to have access to. There is absolutely no point in hiding any skeletons as any effective due diligence process would quickly uncover these and when the nightie drops so does the price!
Having said that, it’s wise to potentially hold back a tad on some good news as it will ultimately strengthen your negotiating hand if/when the buyer attempts to push the price down. And believe me they will find something to justify this action!
