Even when the world seems to be heading for an economic meltdown with financial crashes, global pandemics, and stock market bubbles bursting, businesses still get sold and buyers still buy. So how do you sell your business?
Where a business shows it can give a return to its investors, there will always be buying and selling activity. Most data available in the public domain relates to larger transactions and, whilst it is harder to sell a smaller, privately held business, it still happens on a daily basis. The principal factors are timing and readiness for both parties.
In the UK there is a significant amount of inward investment by overseas buyers. In the last 3 calendar months of 2020, this amounted to over £4.3 billion alone. The buyer for your business may not be a UK-based company or investor. Cross-border acquisitions have been increasing. Domestic (UK-UK) activity has been decreasing and halving to £2.2 billion in the last 3 months of 2020. Equally, if you are a UK buyer, it is now more likely that you are looking at overseas acquisitions, evidenced by the £4.5 billion of outward M&A activity in the last quarter of 2020. (ONS Statistical Bulletin March 2021)
After much delay in some buying and selling activity in 2020, there is a lot of capital available from investors. Estimates indicate that buyers are sitting on trillions of investment funds. Some of this is going to be in the “distressed assets” as businesses face the fall out of the global economic impact of the war in Ukraine, post-pandemic uncertainty etc.
Buyers are likely to pay a great deal of attention to the business fundamentals, not just the financials. Successful sales can be made easier by getting your business “exit ready”. The longer you show that your business has been in this state of readiness, the more comfort you are giving to the buyer. The acquiring investors see that you aren’t in a rush to off load the business but have been preparing for when you want to leave and when the timing is right for you, your business and the other stakeholders.
Malcolm Lloyd, Global Deals Leader, Partner, PwC Spain points out in the PWC Global Trends Report “With so much capital out there, good businesses are commanding high multiples… and achieving them. If this continues – and I believe it will – then the need to double down on value creation is now more relevant than ever for successful M&A.”
Strategy drivers for these investors are the need to fill gaps in portfolios, especially capability in technology, digital strategy, and geographic spread of customers.
In some industries the competition for acquisitions drives value higher, especially in those industries that support digital and enabling technology-based assets. In these cases, the non-financial aspects of your business come in for much closer inspection. Those who prepare and implement good practices become the winners. Some business sectors are going to find it more of a struggle to maintain previously buoyant valuations as their business models have shown higher levels of risk associated with business disruption. Those that adapt to the new digital age win, those who don’t, lose.
Acquirers as well as sellers who are clear on their strategy for transfer of ownership are better placed to succeed and create future value from transactions more easily. One of the keys to successful acquisition is a robust due diligence process. This includes detailed analysis of commercial, operational, and financial variables. Value is attributed to non-financial aspects of the business such as resilience and how future value can be added after the acquisition. Sellers who show a route to added value are more attractive and easier to sell.
Are you ready to leave and sell your business (no matter when it happens)? Click here to contact Christine by email alternatively you can book a call with the Business Mentor of the Year 2020, author and speaker. Who helps business founders get their businesses exit ready so they can enjoy a happier, richer future. She saves them THOUSANDS and increases the value of their businesses by MILLIONS.