Exit Planning – Selling your business

In recent years, much has been written about achieving growth through acquisition. However it is easy to forget that for every announcement of an acquisition, there is a business that has been sold by its owners.

So I thought I should begin to redress this imbalance and begin to share some thoughts aimed at owners of businesses who may now be considering the sale of their business or who may be doing so in the future.

When business owners begin to think about extracting the value (£!!) they have often spent most of their working life creating, they will usually have two main options to consider.

The first option is to enable the next generation to take over the business so that it can remain independent and continue with the ethos, values and ethics of its original owners: this is usually referred to as an MBO (management buyout). This might be younger members of the family taking the business forward or a younger group of managers who have either been brought in specifically or developed by the business with an MBO in mind for the future.

Of course the ‘next generation’ will have their own ideas on the future course of the business but for existing staff and clients, there is likely to be little or no change in the experience that is delivered to them by the business.

A handover of the business to the next generation of the family or to a younger set of the management team needs to be planned well in advance of the anticipated retirement of the current owners: a last minute decision to enable an MBO to take place is likely to be difficult to execute effectively.

The second, and far more widely reported option, is to sell the business to a third party buyer, usually another insurance broking business.

It is very important that the owners of the business for sale do a lot of preparation before going to market: unfortunately it is not uncommon for a business to sell to almost the first buyer who comes knocking on the door: this is probably not the best way to achieve a really good ‘deal’ – good for the owners, good for staff and good for clients.

A few points you might want to consider if selling your business is in your mind now or perhaps in the not too distant future.

• You may not understand how others will value your business and this may limit your ability to negotiate the ‘best’ deal.
• You need to have given thought to what you want to achieve from the sale: not just financial but what about clients and staff? Do you understand the culture of the business you are considering selling to?
• The owners may want or be expected to continue working for a period – they will want to be comfortable working for the new owners.
• There are a wide range of possible acquirers and the owners may not know the fuller range of options available to them.
• Depending on who you are selling to, it is possible the people you are negotiating with do it for a living…you don’t!
• You are likely to under-estimate the demands on your time and the impact this can have on the every day, business as usual operation of your business.

Having experienced advisers helping you through the MBO or sale process will make the process easier, less stressful, and help you achieve a better final outcome. It will also make it easier to maintain confidentiality through the whole process. An experienced adviser will not just ‘advise’, but will ensure you understand the process and help you with the workload you will be facing.

I will be continuing to write on this topic and expand on a number of the points raised but in the meantime please feel free to share this on social media and to comment if you have a point you think is useful to others.

And if any aspects of this are relevant to you at the moment, please don’t hesitate to contact myself or John Miller for a confidential initial conversation…time spent on reconnaissance is rarely wasted!