Selling Your Business

There is a strategy and a discipline in selling your business for high multiples. Not every business can be sold, and not every business can be sold for high multiples but our procedures and checklists can help you determine whether yours can. We have a system that shows you why you would sell your business, when to sell it and how much to sell it for. Without it, you may well be like most other business owners who leave millions on the table - simply because they don't understand how business exits work. 

  

The Two Types of Business Exit

In our experience, we usually see two kinds of business exits when people go to sell a business:

 

  • The first is an exit from a low strategic value business. This type of business has a low competitive advantage, exists amongst many similar businesses and offers little synergy to a buyer. The sale of such business depends upon the buyer continuing the business and/or generating additional revenue by improving and enhancing it.
  • The second is an exit from a high strategic value business. This business has considerable competitive advantage, often unique/hard to copy/ extensive intellectual property and it offers assets that can be leveraged by a larger corporation. The sale of such a business enables the buyer to leverage its position in the market place.


So when you are thinking, "how do I sell my business" our system first sorts your business into one of the two types above.  We then go through the "Buyer Discovery Process" that shows you to whom your business will appeal.  For example:

  • The first type of business appeals to a "financial buyer." This is a buyer that is seeking inherent profitability in the business. This buyer pays only pays low multiples of EBIT.
  • The second type of business appeals to a "strategic buyer." This is a buyer who will exploit the underlying strategic value of the business - often without regard to its present inherent profitability.

Our expertise is in applying a system to seek out those assets, relationships and competencies that might appeal to a strategic buyer. The aim of the system is to justify a higher valuation, increase your EBIT multiple and de-risk the business so that it potential buyers find it attractive.  So when you are wondering how to sell a business, there is already a system in place to take you through it step by step.

 

What We Do For You

If we take on your mandate, we project manage the whole transaction. In particular, we can:

  • Show you how to align management, staff and shareholders to the sale,
  • Advise you on how to create value quickly in the business,
  • Write the information memorandum,
  • Run the vendor's due diligence,
  • Coach you on how to negotiate with potential buyers,
  • Structure the transaction with your accountants,
  • Work with the accountants on the tax implications,
  • Work with the valuers to make sure you have the most up-to-date valuation,
  • Work the lawyers on drafting and finalising the transaction documents, and
  • Guide you step-by-step through the deal itself.

 

We show you a methodology to identify tthe best buyers - those buyers who stand to gain the most from acquiring your assets - and we work with you to negotiate a price that would not be possible without expert assistance.

 

The Difference Between a Business Broker, Corporate Advisor and Investment Bank

Different buyers approach buying your business differently.  The method you choose to sell your business should mirror the buyer's approach.  Typically, sellers of businesses valued at up to $2m-$3m use a business broker.  In general terms, a business broker is focussed on selling your business in its current form quickly.  Business brokers advertise it widely and act as your legal agent in the sale.  They are not typically intimately involved with getting your business transaction ready, simply because they work on commission and are not paid to spend months with you preparing your business for sale.

 

We are corporate advisors, and  corporate advisors are different to business brokers.  Corporate advisors work with you for months before a sale showing you on how to prepare your business for buyers, identifying potential buyers and advising you on how to negotiate.  

 

Corporate advisors do not, however, act as your agent or advertise your business for sale.  The reason is that when you have the right advice, you will know who the most probable buyer of your business is, you will know how to approach them yourself and you will know what to say when you do approach them.  

 

Corporate advisors get involved with businesses valued between $2m-$20m.  In many cases, you will discover that you can sell the business yourself, or you can do it through a business broker at a reduced fee as most of the preparatory work is done.

 

Business sales in the $20m+ range usually go to investment banks, corporate finance houses or the corporate finance divisions of large accounting firms.  The reason is that the deals are more complex, there are fewer buyers able to finance such transactions and many more people are needed to handle the multiple aspects of the deal.  

 

Investment banks, corporate finance houses or large accounting firms usually don't get involved in sub-$20m deals as the deals are not large enough to support the fee structures of these firms.

 

How Business Brokers Work

Business brokers often have backgrounds in real estate broking.  Thus the approach to selling a business is not dissimilar to their approach to selling a property.  They spend time with you getting a description of the business, they prepare a flyer and an information memorandum, they advertise the business for sale, they work with you in dealing with the enquiries and they assist in the documentation of the deal.  

 

A business broker works largely on commission.  This means they are transaction oriented and do not as a general rule get involved in preparing your business for sal or working out a higher valuation based on strategic factors.  The fact that they work largely on commission means that they have an incentive to sell the business quickly.  Some brokers have particular expertise in certain industries and have a lot to add in terms of securing a sucessful sale.

 

Business brokers sell all manner of businesses from cleaning franchises to sandwich bars to panel beaters.  

 

How Corporate Advisors Work

Corporate advisors usually have a background in law, business, strategy or accounting.  They often come out of large law firms, accounting firms or management consultancies.  They are not interested in selling sandwich bars and cafes, but they are interested in selling medium sized businesses to the much large companies that they once advised.

 

Corporate advisors work with you to prepare your business in advance for sale.  They undertake everything from developing your Value Proposition, redoing your branding, advising on cost-cutting and revenue enhancement and showing you in detail how to clean up a business for sale.  They work with you from a position of knowing what large companies want in an acquisition and showing you how to make your business fit the buyer's requirements.  Typically, a corporate advisor's engagement is longer than a business brokers because there is more work to be done in preparing the business in advance.

 

The true value of a corporate advisor is to be able to articulate your business's strategic value to a strategic buyer who will then pay a premium to acquire it. 

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