What Covid-19 taught us about selling businesses.

You’d be forgiven for thinking that the Pandemic impact on business and the wider economy has meant that selling a company is now significantly more challenging than in previous years. Our experience, however, suggests that the challenge in this economy is a blend of preparation and having the right mindset.

Preparation is key.

Knowing the stakes are high when it comes to a successful sale is motivation enough to prepare well in advance. This is especially true when the economy is subject to significant volatility. We strongly encourage our clients’ to take time over the details, such as, how financial information is presented. This requires both attention to detail and access to the relevant data in the right format.

Mike Whittle, Managing Director of EvolutionCBS, comments:

“What’s important as of Spring 2022, is that owners can demonstrate confidence in the significant potential within their businesses. The best way to do so, in our view, is through preparing for the sale well in advance and by having a strong rationale for the future growth in the business. In any event being sale ready is the optimal state for a business irrespective of when you decide to sell.”

Preparation also means asking all the right questions, not only “how much is the business worth?”, but “what are the likely risk factors for any buyer?” and “who are the less-obvious potential acquirers?” It often requires a certain amount of tenacity to ask probing questions. Yet this is exactly what good preparation looks like.

Have the right mindset.

Owners and shareholders who prepare well, tend to approach a sale with more confidence, and if anything, it’s a confident mindset that’s needed at this moment in time. You need the confidence to demonstrate the proactive measures taken to mitigate the impact of COVID-19 on your business, the confidence in your management, and the confidence in your business plan/ growth forecasts.

This is especially important if trading has been challenging. Significant hurdles, such as a poor profit performance due to COVID-19, need not deter a sale. It’s clear that company owners who position themselves confidently on such issues will speak to an acquirer’s appetite for risk mitigation, (inevitably placing themselves in a stronger negotiating position).

Steve Barry, Senior Client Director at EvolutionCBS, comments:

“We’re quick to remind concerned clients that when a company is being sold, it’s now quite usual for both sides of the transaction – acquirers and sellers – to have experienced significant trading volatility as a result of the Pandemic.”

Across the table, the mindset in many acquirer organisations is to seek higher returns on investments, despite current volatility (see our recent blog). For the smart money, to quote Warren Buffet, American business guru, billionaire investor, and philanthropist: “Cash combined with courage in a time of crisis is priceless.” Accordingly, both corporations and Private Equity buyers are making their presence felt in a variety of sectors throughout the Pandemic.

In light of the above, we guide business owners to remain resilient in the face of current volatility (easier said than done), and to feel encouraged, especially if you approach a sale with thorough preparation, the right advisor, and the right mindset.

 

Our free Business Owners Masterclass on 5th May will address the complexities of selling a business, how to engage with Private Equity, as well as other fundamentals, such as valuations, deal structures, handling negotiations, and due diligence. Register here.

 

About EvolutionCBS

EvolutionCBS works with the owners and shareholders of private businesses, helping them to maximise the exit value of their companies. Our high-touch, low volume approach, combined with our values of “Uncompromising Standards” and “Exceptional Results” means that you can be absolutely confident of achieving the best outcome for you and your company.

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