Build Equity Value to Underpin Future Success

Company owners/Shareholders frequently ask the question “How much is my business worth?” However, an equally important question might be “How can I build future Equity Value into the business?” While the answer to this question is multi-faceted, it is undoubtedly as important as any question on the future sale value.

So how do you address the question of building future Equity Value into the business? Firstly, you must start with the end in sight by putting yourself in the shoes of the future acquirer and asking, “What does hold value in the eyes of a purchaser?” This will require some lateral thinking and ultimately a bit of putting your house in order, so to speak.

When deciding upon the value of a Company, acquirers will consider a range of metrics, as part of their initial assessment of where and why they see value in the business. Importantly, although there are many potential deal structures underpinning any transaction, the starting point for pretty much every business valuation will be to consider the perceived risk in the proposed transaction against the business’ trading fundamentals such as turnover, profitability, cash flow and net worth. Buyers and investors want to know what the balance is between ‘risk and reward’ and they’ll consider this against the backdrop of anything they can see, feel and evidence about the business that gives them confidence in its success.

As part of this exercise, alongside the proven training history of the business – as seen in its Profit & Loss data, the Company Balance Sheet will almost certainly feature highly in their assessment of risk. Buyers will look for elements they can see, including the Company’s Equity Value/Shareholders’ Equity, which give them reassurance as to the underlying substance and sustainability of earnings for the business. This indicates not only that the business’ liabilities can and have been satisfactorily dealt with over time, but also that the business has sufficient assets in the background to enable it to survive and prosper in difficult times.

As far as those liabilities are concerned, it’s not a bad idea to limit your exposure to current liabilities, particularly if the majority of these liabilities are loans/lines of credit, (in contrast to cash advances linked to future orders of products/services). Crucially long-term debts owed will feature in any sale, as typically most offers are made on a ‘cash and debt-free’ basis. Thought should be given to any deferred tax liabilities as these will need to be addressed by lawyers/tax specialists during the Due Diligence exercise.

Keeping a healthy amount of cash on the Balance Sheet is also not problematic – and a positive trend in the cash balance of the Company over a period of a few years will certainly do no harm and reinforce your Equity Value, as will ensuring your property, plant and equipment are not in a state of disrepair or dilapidation.

Intangible assets can also make a positive contribution, such as ensuring you have decent written contracts with clients and that any Intellectual Property (IP) is secure (or the relevant copyright is in place for any trademarks or patents) and thus can factor in the acquirer’s approach to valuation.

There are untold benefits to applying some of the above ‘financial hygiene’ in your day-to-day business operations, including the ability to attract Growth Capital. The Deal Team at EvolutionCBS has an excellent track record of supporting and assisting Company owners/shareholders in securing Growth Capital investments.

For context, Growth Capital is essentially funding/investment, which can be utilised for future infrastructure and growth plans. Where there is a demonstrably profitable trading history and a healthy Balance Sheet (including Equity Value), then Growth Capital funding can be obtained from various sources, such as banks, Private Equity firms, or other financial investors and institutions.

In one example, EvolutionCBS assisted a Growth Capital transaction with the existing management team at ERA, who help businesses in the media and entertainments sectors scale up their IT infrastructure to meet increasingly sophisticated editing and rendering requirements.

As part of this work, the Deal Team at EvolutionCBS, spent considerable time with the leadership at ERA, to identify their needs and to discern whether Growth Capital was a route to achieving their objectives. This meant a number of financial investors and organisations were identified and approached by the EvolutionCBS Deal Team, acting on behalf of ERA.

Ultimately, EvolutionCBS engaged with Rockpool Investments, a financial investor dedicated to creating opportunities for High-Net-Worth Individuals (HNWIs) to invest in private companies. Rockpool provides equity and loan financing of between £3m to £12m to profitable UK-based private companies and has invested over £550m since inception.

Steve Barry, Senior Client Director at EvolutionCBS, who led the transaction, commented:

“We are absolutely delighted for the management team at ERA – Growth Capital funding can be a source of unlocking significant future successes. Additionally, this transaction features an excellent business active within the technology-enabled Media and Entertainment industry, engaging with a financial investor committed to the longer-term success of this great business.”

Similarly, the Deal Team at EvolutionCBS worked with Phoebus Software (PSL), a market leading provider to the banking, lending and savings sectors, delivering innovative and seamless solutions for the origination and management of loans and savings accounts. EvolutionCBS ultimately went on to help PSL attract substantial financial investment to support the step change in their growth plans as the business aspired to accelerate its growth trajectory for the future.

Part of this work involved the shareholders considering their longer-term strategic plan to exit the Company, which meant supporting the existing management to promote and unite under their long-established MD as he stepped up into the role of CEO, and then introducing the leadership to NorthEdge Capital, a financial investment firm that supports MBOs, development capital and equity release transactions.

Steve Barry, Senior Client Director at EvolutionCBS, who also led this transaction, commented:

“EvolutionCBS had been supporting Phoebus since late 2015, assisting them in preparing for Robert and Peter’s retirement from the business. Accordingly, we were delighted to introduce the team at Northedge, who provided the funding necessary for the business to go on to achieve its future growth plans.”

In conclusion, company owners/shareholders addressing the question of “How can I build future value into the business?” would be wise to pay attention to their ‘financial hygiene’, essential for a healthy Balance Sheet, alongside continuing to drive turnover and profitability. Lastly, harnessing the acumen of an experienced M&A advisor will also do no harm and could ultimately help you access significant future growth.”


To find out more about what’s involved in selling a business and how to begin your preparations, please join us for a free Business Owners Masterclass on 5th October aboard HMS Belfast in London.


As a long-established premium provider of business sale advisory services to UK businesses, EvolutionCBS offers business owners a complimentary and confidential discussion on how their specific objectives could be met and provides pragmatic, practical advice on how to begin preparing both themselves and their businesses for future sale or investment. 

EvolutionCBS works with owners of UK businesses in any sector, finding buyers from around the world through highly targeted research and supporting clients with dedicated Director-led teams, at every stage of their journey to a successful sale or investment. 

If you are an owner or shareholder of a business and would like a no-obligation consultation on the sale of all or part of your business, please email: or contact us on Tel: 0118 959 8224.

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