Five key considerations before selling your business

Feb 12, 2018
When it comes to selling your business, the bigger picture is always important. The current climate of increased funding and renewed confidence has provided a strong foundation for those considering a sale. Katharine Byrne has five key considerations before selling your business.

Over the last few years, mergers and acquisitions have been accelerating across all sectors with over 70% reported cross-border deal transactions. Valuations have improved as equity buyers look to invest in growing Irish businesses and, since Brexit, more international firms are looking to Irish companies as a gateway into Europe. 

So is now the time to sell? An exit strategy should be an underlying consideration in a business owner's thinking at all times. This doesn't mean having a plan set in stone but it does mean having a clear understanding of where the real value of your company lies and what you need to drive it. It also means regularly reviewing whether the business has its assets properly aligned and is using the most tax-efficient structures. 
Owners sell for a range of reasons. For some, it is the last in a long line of options; for others, the disposal is the high point of a well-executed business plan. Whatever the reasons, there are five key issues to address before you sell your business:

1. Get the right team

Whatever the perspective for you, one core requirement remains the same - the trusted adviser. You will need someone who can bring objectivity, security and structure to the process but, above all, will know how to maximise the value of your business. 

2. Know your business

Identifying the core values of your business, and what will attract a serious offer is central to your selling process. Understanding the strengths and weaknesses as perceived by a potential buyer can be different to the image the owner has built up over the years. Where succession planning or a sudden change in markets trigger a decision to sell, the challenge is to ensure there is a credible business plan in place to adapt to these changes. 

For many vendors, the challenge is understanding what they are selling. Some owners come to the process with a historical focus, believing that the basis for their company's value lies in the historical trading; others sell on the future prospects, looking for a sale price that is based on aspirational growth and potential synergies. The truth is that neither reflects where a serious buyer will be coming from. Owners should focus their efforts on what the business can achieve in the short to medium term – typically the two to three years from when the sale proceeds. 

3. Understand the market

Establishing a credible buyers list at the outset and understanding their market dynamics will be key to a successful sales process. For mid-market businesses, a good adviser should be able to extend the geographical boundaries in the search for a buyer. Historically, SMEs in Ireland have not been strong in looking beyond the local options, but with global firms actively considering openings here, the best opportunity may well be outside Ireland.

4. Be prepared

Whether it’s an owner jumping into unstructured process, often on the back of an unsolicited offer, or providing projections they believe to be credible but which don't stand up under scrutiny, or the question of credibility of a potential buyer’s offer – these are all common pitfalls and key concerns in the sale process.

By not preparing the company for the sales process, value can be leaked throughout the due diligence resulting in lower price and potentially damaging the business. Vendor due diligence is becoming much more common whereby the sellers retain control of the process and are alerted to any significant issues at outset. This provides the business with an opportunity to plan the sales process and seek to mitigate key issues identified. 

5. It's not the end, it might just be the beginning

If selling a business is an education, then it is also almost certainly an emotional roller coaster too. Those who have gone through the process will often say that they didn't expect the experience to be so demanding. However, many will also say the process gives them an entirely new perspective on the business and left them with an appetite to get into something new, but this time with a much clearer understanding of where the value lies in a business. 

Katharine Byrne is a Partner in Corporate Finance at BDO.