22 Dec 2017 | 03.52 pm
Is Now The Time To Sell Your Business?
'There are more funding options available than any time in recent years'
22 Dec 2017 | 03.52 pm
The current climate of renewed confidence and increased funding options provides a strong foundation for those considering a business sale, according to Richard Duffy and Katharine Byrne (pictured) of BDO Corporate Finance
Are you considering selling your business? In recent years, M&A has accelerated across all sectors. Valuations have improved as equity buyers look to invest in growing Irish businesses and as more international firms look to Irish companies as a gateway to Europe post-Brexit.
One option being adopted by an increasing number of Irish business owners this year is selling to management buy-out teams (MBO) and management buy-in teams (MBI). An MBO/MBI provides the ability to do a quiet deal without the publicity that can unsettle staff, customers and suppliers. There are more funding options available today than any time in the recent past and there is plenty of finance available. We have advised on a raft of MBO/MBIs, the most recent being the MBO team of Clearcircle on their acquisition of the environmental services arm from One51 plc.
So is now the time to sell? An exit strategy should be an underlying consideration in a business owner’s planning at all times. This requires a clear understanding of where the real value of your company lies, and what you need to drive it. Owners sell for a range of reasons, and whatever the rationale there are a few key issues to address:
Get an experienced adviser on board
One core requirement remains the same whatever the circumstances – the need for a trusted and experienced adviser who can bring objectivity, security and structure to the process. Above all, they will know how to maximise the value of your business.
Understand what you are selling
Identifying the core values of your business and what will attract a serious offer is central to your selling process. The strengths and weaknesses perceived by a potential buyer can be different to the perception the owner has formed over the years, so understanding these differences is key.
One of the common pitfalls we see is a business owner jumping into an unstructured process, often on the back of an unsolicited offer. Owners may either provide a set of projections that don’t stand up to scrutiny, or share sensitive information without necessary protections in place. Another common issue is where the business owner holds back on a key piece of information that emerges late in the process and becomes a deal-breaker.
By not preparing the company for the sales process, value can be leaked throughout the due diligence process, resulting in lower price and potentially damaging the business. ‘Vendor Due Diligence’ is becoming much more common, whereby the sellers retain control of the process and are alerted to any significant issues at the outset.
Understand the buyers
Establishing a valid buyers list at the outset and understanding their market dynamics will be key to a successful sales process. For mid-market businesses, a good adviser will be able to extend the geographical boundaries in the search for a buyer. Historically SMEs in Ireland tended to not look beyond options locally. However, with many global firms actively considering opportunities here, the best acquirer may well be outside of Ireland.
Overall, it’s a competitive buyers’ market, which is encouraging for any business owner considering selling their business. The buyers are willing and the funding is available. In order to successfully sell your business, prepare well, be credible and, most importantly, seek advice.
• Katharine Byrne is a Partner and Richard Duffy is a Director in BDO Corporate Finance.