Page 22 - Wealth of Experience - Selling a Business 2019

THE DATING GAME

Selling a business can be a lengthy How long was the sales process from Trade buyers Trade
process. Rome wasn’t built in a day - making the decision to sell, Business owners commonly look for buyers within their buyer
and evidently neither are good business to completion? sector. Whether it’s a customer, supplier or competitor
sales. Just 11% of respondents sold there are many reasons for trade buyers to acquire Private
their business in under 6 months . MONTHS businesses including growth of market share, to broaden equity
9
Getting a business in the ideal shape 11% a product offering or acquire more elements of the value
so that it displays maximum value to 0 to 6 chain. Management
prospective buyers is key. There may be trade buyers who are looking to enter the team
owner’s sector who view a purchase as the best way to
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A recent Deloitte report identified that there’s been an 6 to 12 37% achieve this. It’s not easy to identify these opportunities
Other
increase in companies using mergers and acquisitions and a strong network of advisers and contacts can help to
(M&A) to pursue growth since 2014. It’s been popular as find buyers who might not jump out in the initial stages. In
debt has been cheap and companies have had record today’s connected global marketplace a network that goes
levels of cash reserves. 12 to 18 26% beyond geographical boundaries is critical.
Finding the right buyer depends on wide ranging factors Closing the deal
and the relationship will be always be influenced by the
buyers motives. Understanding the reasons behind a 18 + 26% Our respondents told us that they sold their firm to
purchase is often very important. A life’s work dismantled a pretty diverse set of buyers. Unsurprisingly, trade
by an aggressive competitor takeover may not be to buyers represented the largest portion of sales, although
everyone’s liking – so keep your culture in mind as this is private equity is a strong option for sellers. None of
often cited as an important consideration. MBOs our respondents reported that they sold their business
to family members. This reflects a wider decline in the
Private equity A management buyout (MBO) can be an attractive option. number of UK businesses that remain within families.
The buyers will know the business and the existing culture
Private equity firms often operate in a financial could remain the same for years to come. A proven More of our respondents (32%) found the business sale
environment rather than an entrepreneurial one and this leadership team are likely to continue with the existing took longer than they originally thought, compared with
mind set can pose some unique challenges for business strategy, ensuring employees remain reassured about their those who thought the sale was faster than expected
owners. They can demand a lot of visibility in the business futures, a consideration that’s important to many owners . (11%). Often it can be time consuming for business
to enable them to make key decisions. owners to find a buyer prepared to pay their desired sale 21
In addition, the due diligence process will be shorter
Typically they want to back an existing, high quality price and undertake a thorough due diligence process.
management team and find a business that has room to and exit planning for the owner may be a continuation of
grow rapidly over a few years. But for business owners existing planning. Who was the business sold to?
who have previously been only accountable to themselves, The challenge for many MBOs is the issue of raising
bringing a private equity firm into the mix can be a massive finance. In simple terms, the leadership team may have
challenge. We found that 31.6% of our respondents sold an appetite to acquire the business but not the means. Trade 47%
to private equity and this type of buyout rose by 3% Funding options could include bank debt, private equity buyer
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in the first half of 2018 according to Experian’s H1 2018 and the vendor loaning back some of the sale proceeds to
MarketIQ report . the company to be repaid over time. Private 31%
12
MONTHS
However, private equity firms usually invest substantially equity
into a business’s infrastructure - improving systems,
providing funding and investing in technology which can Management
0 to 6
drive growth throughout the business. team 21%

6 to 12
Other 10%

12 to 18

9 Cooper Parry Wealth of Experience Survey Q16
18 + 10 Deloitte ‘Past as prologue: Navigating through the 2018- 2020 M&A cycle’
22 11 Cooper Parry ‘Wealth of Experience Survey (Q6)’
12 MarketIQ ‘United Kingdom and Republic of Ireland M&A Review H1 2018’

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