Why selling your business is like running an election campaign

Preparing to sell your business is like running an election campaign, says Andrew Boyle. You need to keep the message simple and spread the word.

Despite global deal-making faltering in the face of geo-political tensions and economic uncertainty, there are still plenty of opportunities for UK companies when it comes to selling your business.

Foreign buyers remain active. Inbound M&A in the UK between April and June this year rose from £10.8bn to £18.4bn compared with the same quarter last year.

But in view of weaker market conditions, it is vital that you prepare meticulously for selling your business.

Critical steps include making sure the business is exit ready, being prepared for robust due diligence, and ensuring that the management team is not overwhelmed by the process.

However, the most vital step and one often overlooked by many is having a compelling narrative, vision and strategy which is relevant to the most appropriate type of buyer. In these ways, vendors can ensure the best price is achieved and execution risks are minimised.

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Ensure you plan and prepare

During the sale process the most common cause of buyers backing out or price chipping is the seller’s failure to be prepared for robust due diligence. Before the sale process has even begun, vendors should carry out their own due diligence to check for any issues in advance. This way any problems can be identified and rectified in order to ensure a smooth sale.

  • Stakeholders need to be aligned and so that the physical and human assets of a business can be transferred to new ownership
  • Every contract and business relationship should be reviewed and amended if required
  • The status of any intellectual property should be confirmed
  • Accounting and financial management policies should be reconsidered to ensure that they are appropriately reflecting the value of the business

Keep the messaging simple

Once the groundwork has been prepared, vendors need to establish a compelling narrative around the exciting prospects of the business and a persuasive vision of its future.

Achieving a successful exit is comparable to running for elected office; there needs to be a clear and strong story that sets out why a buyer should select your business in particular rather than another. The narrative should be consistent and authentic. It should be articulated with confidence by all members of the management team. Failure to do this might be symptomatic of issues that need to be addressed before the start of a sale process.

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What kind of buyer are you looking for?

One benefit of a clear acquisition narrative is that it highlights the most appropriate type of buyer. For example, a business which is ready to scale given greater operating resources or one that could benefit from stripping out costs, might be appropriate for a trade sale. Trade buyers look for specific business merits such as new technology or markets, margin enhancement or customer acquisitions.

Alternatively, a business that requires additional financial resources for investment in its products and services might be more appropriate for financial buyers who are focus on achieving investment returns within specified periods. There might be features of a business that will appeal to buyers in certain business niches or geographic locations within these categories.

Share the vision with wider stakeholders

Once the narrative has been developed and agreed, it’s important to plan how to disseminate a company’s value proposition. In addition to advertising and PR, a company’s wider stakeholders, including suppliers, distributors and customers, should become involved. It is quite possible that if a corporate or financial buyer wishes to make an acquisition in a particular sector, it will ask business counterparties and customers which products or services they value. One never knows how an acquisition approach arises.

Set out easily understood milestones

Once they are engaged, potential buyers will watch the performance of a businesses closely, expecting it to achieve the rate of growth set out by the vendors. In this regard, it is important to present a clear roadmap of growth which shows how milestones will be met. These should include non-financial metrics that are within the control of management. Vendors should keep the attention of the buyers on measures that are consistent with the long-term value proposition of the business, and avoid short-term factors such as the winning of particular contracts as these might be difficult to achieve going forward while a transaction is going on.

Andrew Boyle is CEO of LGB & Co, where he chairs the company’s management committee and oversees its corporate finance and investment activities

Further reading on selling your business

How to sell your small business through a broker

Related Topics

Selling a Business