There comes a time in the journey of most businesses when big decisions are made. Do I sell, in whole or in part? Do I float? Do I acquire another business to grow mine ever further? Ultimately, buyers want the best price for the business they’re acquiring – with no nasty surprises – and sellers want their company to be as attractive as possible.
The West of England is particularly fertile ground for mergers and acquisitions, being supported by a strong community of dynamic businesses. The pool of capital available to be put to work is broad, with debt funds, family offices and other institutional investors active alongside corporate and private equity operators.
It’s a positive trend that we’ve been seeing at Grant Thornton but we think the bar for deal making can be raised even higher in 2017 and beyond. Not simply for the number of deals happening, but the value attached to each and every business we advise.
This is about value optimisation, not just a straight-forward transaction. It’s important to consider what factors an acquirer attaches value to. These could include the clarity of your focus, the business model it employs and the business’ scalability and resilience if the landscape changed quickly.
My advice to business owners is to invest time in getting your business ready to sell or float in order to maximise its value. That means knowing up front what is important to buyers or investors. If you choose to sell and vendor due diligence is your chosen route this can identify areas of value, putting the control of the diligence process in the hands of the seller.
It’s more critical than ever. The market is becoming increasingly and the deals process is getting robust. Strict due diligence in the run up to a sale means that a lot can go wrong to make a deal fall through. Deals that used to take two months to finalise can now typically take four or five months as propositions are vigorously tested and finances are scrutinised.
It’s why we believe it’s vital to work with an advisor who understands your business and has been on the journey with you for some time. They’re trusted and informed enough to be honest about what’s best for you and your business. Should you be thinking earlier about separating two divisions to allow for a better price at sale? Are there underlying issues that need addressing?
We’re lucky enough to work with some of the region’s most dynamic, fast growth businesses. Sometimes, they’re dynamic and ambitious by their nature and that’s why they know we can help them. Other times, we challenge and help clients to become more dynamic in their approach, realising where the value can best be maximised and the path to get there.
We want to change the model for how companies choose their advisors. Often, a pitch process can fail to deliver the best value for a sale. Akin to estate agents valuing your home, do you want an advisor to tell you the highest price (knowing that potentially, you could be disappointed)? Or someone to help you spot that damp patch and remedy it, avoiding any nasty surprises when the buyer’s survey is completed?
Selling, buying, or floating a business is rarely an easy decision, nor something that’s decided overnight. It’s a journey that is embarked upon often many years earlier where a clear strategy is put in place, with the help of an advisor, to make the business as attractive as possible for sale and ultimately get the most bang for your buck.