When is the right time to sell your business, and how do you go about it? Our latest round table, sponsored by Mazars, asked business owners and the advisers.
Do business owners inherently know when the time is right to sell their business?
Steve English: Yes and no. Because we work so closely with our clients, we like to think they’re well-informed of the market. I’ve seen examples when that hasn’t been the case, though, and when owners have waited too long to sell.
Mark Carrington: There’s always the temptation to hang on. But you have to decide when the time is right. It’s inevitable that you’re going to have to leave at some point, after all.
Paul Baker: I’ve been challenged about this. Do you sell your company when times are bad, because you want to get out, or do you sell it when things are on the up and you can get a better price? Age is another factor. I’d like to think I’d be selling my company to start again.
Paul Bevan: It’s intriguing for us because there are only so many buyers out there, but there are a wave of of business owners looking to sell, and the pipeline is somewhat clogged – and it’s across every single sector and every single territory.
Steve Sanderson: We looked at selling in 2007, but we pulled the plug because it wasn’t the right time. We’ve cruised along for the last five years – we don’t want any extra work, but we’ve got new customers getting in touch with us on a daily basis. It’s a question of ‘when do you hand it over?’ Especially when it’s been your life.
Lisa Botterill: I’ve found that international buyers are quite active, but that it’s patchy on sectors.
Jon Steel: There are definitely eyes looking in from overseas.
Matt Bull: Another layer of difficulty when it comes to knowing when the time is right to sell a business is if you’re incredibly busy. You need to sit down and come up with a plan.
Bevan: There is a lot more choice nowadays for owners looking to sell. More often than not they could do a deal with their management team. The banks are lending more, and US buyers are being helped by their banks lending on longer terms.
English: I’d like to ask Steve a question; do you think that family businesses can achieve the same value as non-family ones?
Sanderson: I think we tend to put our heart and soul in to the business, and so yes, I do. I want to leave my legacy within the business.
Steve Haines: It’s my pension, so I’ll try as hard possible to make it achieve what I think it’s worth.
How should a business owner go about putting a team together for exit?
English: It’s all about getting maximum value. You need to put in a place a long-term plan and have an idea about who your ideal buyer is. You’ll need good finance and operations people and a commercially-minded managing director – and always have one eye on the future.
Mark Carrington: You need interaction between senior staff, and to make sure there is chemistry between senior people.
Bevan: You have to ask ‘how predictable can we be?’ Banks and investors are looking for predictability. You might be looking to sell, but are you ready to be bought?
Are business owners always aware of the tax implications when it comes to selling a business?
Emma English: Most owners are aware of the headline details, but it’s always best to look beyond the headlines. Are there assets in the business that won’t be sold, for example.
Sanderson: It’s not really something I’ve thought about. For me it’s about what you do when it comes to stepping back from the business.
Botterill: We only really get involved right at the end of a deal, and when you’ve invested your entire life in a business it can be a very clinical process.
Carrington: People’s attitudes to tax change as they get older. But my advice would be to start talking about inheritance tax as early as possible
Bull: I used to be an adviser, and I was very aware of the emotions involved. How do you manage the expectations of the family you’re leaving the business to?
Sanderson: My son thinks I’m holding him back, but they’ve never really had to worry about where the next pound is coming from.
Bevan: My advice would be to try and walk as straight a line as you can – only that way do you get fairness throughout the process. We’ve got to keep the vendors in check and the management on side. With the advisory role it’s very important not to take sides.
How can a business owner ensure s/he gets the right prize for their business?
Bevan: Sell at the top of the market. However, they’ve also got to get their business in the right position to sell and market it in the right way to the right people.
Botterill: A busines owner shouldn’t give the buyer any chance to lower their price or change their mind altogether. Also, you should fix what’s wrong with your business before you look for a buyer.
Haines: You’ve got to mark down a starting point and resist the temptation to hang on. For me, it’s all about having a pension coming through.
Bull: Sit down and have a look how you can extract value over a five-year plan.
Carrington: For me it’s about starting early, taking it slowly and making sure you get all the right advice. Do it when you need to do it.
Sanderson: You have to remember that you always have options – you don’t have to sell. You have a choice, and it doesn’t have to be rushed through in six or 12 months.
Steve English: I agree, it’s all about taking your time and having the right conversations with the right people.
Emma English: Incentivising your management team all the way up to the point of sale is also very important.
Bevan: I’d say that now is a good time to make a move. There is a lot more knowledge out there when it comes to buying a business. I don’t see the market for transactions disappearing. We could see 2008 levels of activity again – there’s no doubt about that.
Steve Sanderson, Sanderson Transport
Steve Haines, S&J Haulage
Mark Carrington, King Vehicle Engineering
Lisa Botterill, Nelsons
Paul Baker, Bakers Waste
Matt Bull, Sheridan & Co.
Jon Steel, Barclays
Emma English, Mazars
Steve English, Mazars
Paul Bevan, Mazars