Getting the right advice when it comes to selling your business

For many business owners, selling a company is a once-in-a-lifetime decision. It may represent the culmination of decades of hard work, provide the opportunity to realise the value they have created, or form part of a longer-term succession plan.

But receiving an offer doesn’t necessarily mean it’s the right time to sell.

The mergers and acquisitions market will always be influenced by wider economic conditions, access to finance, investor confidence and the strategic priorities of buyers. At the same time, individual businesses and their owners have their own reasons for considering a sale.

An approach may arrive unexpectedly. An owner may be actively planning an exit. A management team might be considering a buyout. Or another business may see an opportunity to acquire complementary expertise, customers or market share.

Whatever prompts the conversation, one thing remains important: the right deal is about much more than the headline price.

Preparation can make a significant difference

Ideally, planning for a sale begins well before the business goes to market. Taking time to prepare can help identify issues that might concern a potential buyer, strengthen the financial story behind the business and demonstrate where future value lies.

That might include reviewing financial information and forecasts, understanding sustainable profitability, considering customer or supplier concentration, looking at management structures and identifying areas where the business remains too dependent on its owner.

Tax should also form part of that planning. The tax treatment of a business disposal can materially affect the owner's eventual proceeds and the rules and available reliefs can change, making early professional advice particularly important.

The better prepared a business is, the stronger the position from which its owners can enter negotiations.

Five things to look for in an adviser

If you’re thinking about selling your business - whether in the near future or several years from now - choosing the right adviser matters. Here are five things we believe business owners should consider.

1. Track record

Experience counts. Ask what kinds of transactions your adviser has handled and whether they have experience of businesses of a similar size, ownership structure or sector. Don't just ask about the deals they have completed; ask about the ones they advised clients not to pursue. Knowing when to walk away can be every bit as important as knowing how to get a deal over the line.

References and testimonials from previous clients can also provide valuable reassurance, particularly when they come from business owners who have had time to reflect on the transaction after completion.

2. The right chemistry

Selling a business can be an intensive process and there may be difficult conversations and decisions along the way. You need to trust your adviser, communicate openly with them and know that they understand what you want to achieve. If the relationship doesn't feel right at the outset, it is unlikely to become easier when negotiations become more demanding.

3. A clear understanding of value

A good adviser should help you understand what drives the value of your business - and how that value can be presented convincingly to potential buyers. That goes beyond looking at the latest set of accounts. Buyers may consider recurring revenues, customer relationships, intellectual property, market position, growth potential, management capability and a range of other factors.

Your adviser should also be able to challenge your assumptions. The figure you have in mind and the value the market is prepared to place on the business may not always be the same.

4. Transparency

You should understand from the outset how your adviser will work, what the process is likely to involve and how fees will be structured. Just as importantly, you should know whose interests are driving the transaction.

An adviser whose sole objective is to complete a deal may not always be aligned with an owner's longer-term interests. The advice should remain focused on achieving the right outcome for you -including recommending that you step away if the deal no longer makes sense.

5. The right process

A successful sale involves much more than finding a buyer: valuation, preparation, identifying potential acquirers, presenting the business, negotiating heads of terms, due diligence, tax planning and completion all need to be carefully managed.

Clear communication throughout the process helps everyone understand what is required and when. As negotiations progress, experience, commercial judgement and attention to detail become increasingly important.

Sometimes the best advice is to say no

Ultimately, one of the most valuable things an adviser can bring to a transaction is objectivity.

An offer can be exciting, particularly when it appears to put an attractive value on a business. But the structure of the deal, payment terms, conditions, future responsibilities, tax implications and risks all need careful consideration.

There are times when the right advice is to proceed. There are others when the terms should be renegotiated - and occasions when the best decision is to walk away altogether. A good adviser should be prepared to recommend all three.

At Infinity, we have advised clients on transactions from both sides of the table. That experience reinforces an important point: completing a deal should never be the objective at any cost. The aim is to achieve the right outcome for the business owner.

Start the conversation early

You don't need to have decided to sell before speaking to an adviser.

In fact, some of the most valuable work can be done years before a transaction takes place - understanding what your business may be worth, identifying what could increase that value and putting the right structures in place for an eventual exit.

And if an unexpected offer arrives in the meantime, you'll be in a much better position to decide whether it's an opportunity worth pursuing.