The sale of an owner managed private business can be a difficult activity for
two reasons:
- There is no established market place for this type of business
- Owner managed businesses have usually developed around the skills and experience of the current owners. As a result it may be difficult for the prospective purchaser to operate the business in isolation or to integrate it with its own activities, leading them to decide against the purchase or to reduce their offer.
In addition business owners often underestimate the time it takes to identify
a purchaser, negotiate terms, facilitate the due diligence process and secure
the sale. The successful sale of this type of business can take a year, sometimes
more, during which time the owners must ensure that the business continues to
operate effectively and that Turnover and Profit are not adversely affected.
In preparing a business for sale its owners should identify the attributes of
their business that will be appealing to external investors and those that will
be unappealing. They should develop the positive and mitigate the negative attributes
so as to develop a business that is attractive to investors, leading to a quicker
sale and a higher transaction price. In general the more systemised the business
is and the more its operations are codified, the easier it will be for a new owner
to operate the business or integrate it with an existing business and the higher
the value they will put on it.
If a particular group of strategic investors can be identified it may be possible
to alter the profile of the existing business to resemble the type of business
the target investors are most interested in. The earlier you start the more likely
you are to succeed.
It is difficult to make general comments about the most attractive profile of
a business being offered for sale, but the attached target profile gives an indication
of the areas investors are interested in.
SPS Partners do have experience of the sale of private businesses and would be happy to discuss the proposed sale of your business with you.
For more information, or for an initial discussion call Mike Robson on 08456 581185 or email him at mailto:mike.robson@talktosps.com
Target Profile of a company for sale - A Buyer’s wish list
Market
Clear marketing proposition in all markets served
Growing markets
A significant prescence in the markets served (attractive to strategic investors)
No redundant or peripheral business streams
Identifiable advantages over competitors (proposition, systems, IPR)
Client loyalty not dependant on their relationship with the owner
Attractive branding and image
Ability to replicate the service in other markets (sectors or geographically)
Management
Established and motivated second tier management with:
Correct mix of skills and experience
Track record of working together
Ability to operate without the owner
Track record of working together
Ability to operate without the owner
Financial
Three years of steady growth in turnover and maintainable earnings (profit after tax excluding exceptional items)
Accurate financial information and reliable systems
Revenues not reliant on a small number of customers (no single customer over 10%)
Good repeat revenues or rationale for recurrent project business
The Company
Strong compliance with industry and statutory requirements
No litigation (Certainly no unquantifiable outstanding litigation)
Absence of minority shareholders with interests not in line with the owners
Smart, motivated, trained staff and premises
Low staff turnover
The owner
Good reason for selling
Unlikely to compete
Capable of covering warranties