Selling a business is a complex process that may involve several considerations. The value will be influenced by many factors, including the reason for the sale, the timing of the sale, the strength of the business’s operations, as well as the level of maintainable profits, economic factors and the ever-increasing desire to meet ESG (Environmental, Social, and Governance) obligations.

People often have different motivations for selling their business. These may be personal or commercial. Being clear about the reasons for sale as well as what you want in terms of value and timing will keep the process smooth. Here are some tips to help you navigate the process and help you achieve your objectives.

Personal financial aspirations

It is important for you to understand what your financial requirements are from a deal. To do so, get professional advice to determine how much you need. Discuss timing, business valuation and your objectives with a Corporate Finance team. Knowing what to expect from the process will help you prepare. Be sure to ask for advice on difficult decisions. Use your advisers as much as possible to ensure that you can concentrate on running the business and maintaining value.

Consider the merits of the proposed sale route

There are several transaction types that may be considered when looking to sell your business. For example, you may decide to sell your business outright or only partially. Both of which may include sale to a trade buyer, its management team and/or employees, or perhaps to private equity. Each option has its advantages and disadvantages and these, along with the individual circumstances of the business, must be considered when choosing your exit route.

If you are looking to realise some but not all of your value, then partial sales are a good compromise if the right partner can be found.

Personal aspirations

Be clear about your personal requirements from a deal, both monetary and otherwise. For example, outline whether you are prepared to stay involved in the business post-sale. Many owner managers have difficulty working for others but Earn Out arrangements often require them to do so.

Ask for advice

Negotiating the right deal can be both time consuming and overwhelming. Having clear objectives and understanding the process will help you navigate much more efficiently. However, this is where your advisers come in. It is their job to persuade the buyer to get you the best possible deal. In addition, to gain insight into the process and what to expect, speak to others who have been through a similar transaction.

Consider all options

Be open-minded. Meet with private equity investors, banks, and other funding providers to fully understand all options available.

The Buyer

Spend time getting to know the buyer and understand what is important to them. Additionally, you need to understand their intentions for the business. If they are not familiar with you and your sector, ensure they understand the business well.

Internal infrastructure

Review your business systems and processes to ensure they are effective, streamlined, and fit for purpose. Such systems and processes will help to guarantee a smooth transition (a buyer should be mindful of this).

Devise a strategy for informing stakeholders, employees and customers about the deal. A lack of communication may have a negative impact on the business and its value.

Preparation

Be prepared for rigorous due diligence processes – financial, commercial and legal. Your advisers can help you manage the process and can facilitate the exchange of information.

All information should be consistently and clearly presented. Any negative information should be carefully packaged.

During the closing stages of the deal, current trading and pipeline numbers are under scrutiny. You need to keep your eye on the ball as if the latest numbers go off track, it can significantly weaken your position.