January 18, 2018
Article
Whilst the notion that attractiveness or beauty is ‘in the eye of the beholder’, this often rings true in the mergers and acquisitions world. The fact that seemingly comparable businesses often achieve quite different sale values is evidence in itself that any action that can be taken to maximise the appeal of your business to purchasers, is time and money well spent.
Setting aside the appeal of different business sectors, the attractiveness of your business often comes down to its ‘sellability’. Sellability itself is determined by a range of factors, many of which can be actively managed to improve the likelihood of a successful sale. Indeed we have been able to successfully assist our clients in improving the sellability and attractiveness of their businesses, which has ultimately helped to improve and maximise the sales price achieved.
Placing yourself in the ‘shoes’ of a potential buyer will help business owners to identify a number of areas in the business that could limit its attractiveness and sellability. However, some points are less obvious so here are the top 10 attributes that you should be aiming for, in order to maximise the appeal (and sales value) of your business:
1) Visibility: Have a good, easy to navigate website. Maximise PR opportunities in the local press etc and establish a social media presence if appropriate.
2) Credibility: Ensure that your business holds and keeps up-to-date the relevant industry accreditations and be an active member of relevant trade bodies.
3) Profitability: Profitable businesses are easier to market and a steady and consistent pattern of growth demonstrations that the business is on the right track. Any non-essential costs should be stripped out to reflect the true commercial profitability of the business.
4) Cash generation: Cash continues to be king and ultimately provides the return on an acquirers’ investment. Cash generation and cash flow can often be improved through better working capital management.
5) Organisation and preparation: Maintaining accurate organisational charts and ensuring key documents/contracts are in order; along with up-to-date management information/budgets will be crucial in helping a potential acquirer to understand and gain confidence in your business.
6) Consistency: ensure that information about your business is prepared on a consistent and comparable basis to help an acquirer understand how the business has developed.
7) Be forward-looking: short, medium and long-term business plans/ projections and an awareness of potential risks with an associated plan of action to address such risks, will demonstrate a more robust proposition
8) Be well managed: a structured management team with responsibility for the strategic direction of the business and which acts autonomously from the current owners will add considerably to the appeal of the business. This is likely to provide a potential purchaser with the confidence that the ‘value’ of the business relates to the business and not its current owner.
9) Be aware: although existing owners may already have a good idea of the likely buyer for their business, having an awareness of the how such potential buyers perceive your business will place you in a stronger negotiating position.
10) Flexibility: be flexible in terms of exit route and timescales to maximise the eventual sales price of your business.
Whilst many of these points can be addressed internally, having ideas and a helping hand to keep you on track is often key in helping improve the attractiveness of your business. Similarly, the fact that many owner managed businesses do not have the spare resources to manage such a project means that outside assistance from Albert Goodman has been invaluable in helping our clients identify, design and implement an appropriate and effective succession plan, be it an internal family transition or an external exit.
But these things cannot be implemented overnight; the sooner you start thinking about this, the better! Drawing on the extensive resources both within Albert Goodman as well as the resources available to us via our membership of the Corporate Finance Network (which provides further Corporate Finance support and national coverage), we offer a confidential, personalised one hour exit planning workshop, where we can determine the priorities for your business, produce some benchmarking statistics, and help you decide how to best approach succession planning for your business.