Most M&A bloggers will publish scary stories about why businesses fail to sell, which is understandable, given that every year countless business owners attempt to sell a company, only to suffer frustration en route to an eventual sale.

So to help navigate the negativity, here are Five Key Ways business owners can improve their chances of a successful company sale, when they do choose to sell:

1. Have the right mindset.

This may sound obvious, but having a clear rationale for the sale, including a clear plan for life post-deal is extremely beneficial for company owners. This is crucial for forming the right mindset when selling, something that will help an owner get through even the most difficult days of negotiations and due diligence.

On the other side of the table, the acquirer and their advisory team will be looking for signals that you are fully committed to the deal.

Early on in the process, this is where the support of an experienced adviser is invaluable, providing advice, guidance and coaching, to adopt the right mindset ahead of any negotiations.

With the right mindset and the right advisors at your side, there should be no obstacles to securing both the value and deal structure you desire.

2. Be fully prepared.

The more preparation an owner can do ahead of talking to seriously interested parties, the more likelihood there is of achieving a positive outcome. The process of preparing might well include clarifying details of the business, understanding likely valuation and deal structures, creating the necessary sale documentation, financial analysis and planning, negotiation training, and advising on how best to achieve the individual needs of each of the shareholders.

With the right advisor onboard, they will help you codify and implement a plan that helps you prepare, protect your best interests and achieve the valuation that you deserve for your company.

3. Get your finances in order.

To enter negotiations on the strongest possible footing, it is well worth understanding how your historic financial performance, current trading, and forecast projections will impact any valuation of the business.

It can be nonsense to say simply because a business is profitable this will inevitably drive valuations higher. In reality, the presence of intellectual property, a defensible sector niche, or a strong senior management team can make all the difference to deal valuations.

That said, any advisor worth their salt will want to ensure that the true underlying profitability is recognised and documented with appropriate financial reporting. This inevitably means presenting appropriate profit adjustments to ensure the true profitability and cash generative ability of the business are understood.  Often referred to as “add backs” and “add forwards”, adjustments to profit become central to any discussions on profitability, with figures being used to indicate the underlying profitability of a business post-sale.

Crucially,  during negotiations, you must ensure that any financial reporting or projections published can be validated once an acquirer begins to pick through the figures with a fine-tooth comb.

4. Conduct a transparent process.

‘Caveat emptor’ or buyer beware, is the assumed footing for any negotiations as far as acquirers are concerned. As we mentioned in our recent blog on deal structures, acquirers will seek out any and all risks associated with an acquisition, so expect your business to be subject to intense levels of scrutiny.

For most sellers, the tension here is that any sale requires a high degree of confidentiality. Most rely on non-disclosure agreements (NDAs), before revealing increasingly sensitive levels of data. Accordingly, the process must be limited to a qualified shortlist of acquirers and the relevant advisors only.

Note that if there is any hint of obfuscation, inaccuracy or deliberate misinformation this could result in the acquirer terminating the transaction – a costly and regrettable result for both parties.

5. Secure the right advisory team.

Finally, it’s no coincidence that in each of the points above we’ve highlighted the need it’s to retain the right M&A advisor who can secure you a significant return on the investment (ROI) you have put into your business over the years. The team must have a demonstrable track record of deals, rather than simply focusing on accountancy or legal services with sale advisory as an add-on service.

The right advisor will get themselves under the skin of your business and embed themselves in your commercial life for the duration of the process. The real skill of an M&A adviser is ultimately to negotiate hard for the best possible deal (valuation and structure) with a select group of acquirers. For good measure, an experienced M&A lawyer will also be an essential part of the sale of your company, once an offer has been accepted and you commence the often challenging Due Diligence proceedings.

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Considering a sale of your business?

Our free Business Owners Masterclass on 12th October will address these and other complexities of selling a business, including how companies are valued, as well as other fundamentals, such as earn-outs, handling negotiations, and due diligence.

Register your interest now: https://www.evolutioncbs.co.uk/events/ 

About Us

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 provide pragmatic, practical advice on how to begin preparing both themselves and their businesses for a future sale.

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.

If you are an owner or shareholder of a business and would like a no obligation consultation on the sale of your business, please email:  info@evolutioncbs.co.uk or contact us on Tel: 0118 959 8224.

About the Author

Steve Barry is Senior Client Director at EvolutionCBS and has a 30 year track record as a transformational business leader, with outstanding expertise in mergers and acquisitions, deal negotiation, leadership, business transformation and turnaround, post-acquisition integration and structured growth.

As EvolutionCBS’ most successful Client Director Steve has previously been awarded both our ‘Employee of the Year Award’ and the ‘Client Service Award’ and is justifiably proud of his 92% Conversion Rate from Heads of Terms to Completion (across a total of 17 transactions in the last 4 years) and an average deal size approaching £13m reflecting delivery of almost 10 times pre-adjusted earnings for his clients.