Think strategically to maximise the value of your business on exit

Strategy meeting in the office

Fear that Brexit would impact on M&A has been misplaced – so far. Activity is holding up driven by the increased purchasing power of overseas strategic buyers.

The key to maximising value and resilience in business is to think strategically. For successful East of England companies focussing on strategic value drivers is yielding good exits. It’s also important for those not selling but planning to maximise value later.  And will ensure businesses are stronger and more resilient when the negative effects of Brexit inevitably flow through.

There are a number of themes which have relevance for anyone planning an exit.
 

Geographic Spread

Of interest is the geographic spread of our work, with parties to our recent transactions in Canada, France, Australia, and the US as well as the UK. Unless you have a small business which is only of interest to local buyers and too small to be a cross-border deal it’s imperative to secure a proper international marketing of your business. Our track-record and international reach through Kreston International mean we’re well placed to deliver such deals.
 

Strategic Fit

A keystone for a successful company sale it is the strategic fit of the target for the bidder. The others two key building blocks being good company performance, and a having a strong advisory process.
 

Planning early

Some company sales come out of the blue when the right buyer knocks at the door but this is the exception to the rule. Not all companies are ready to be sold. Success generally comes after years spent building the company, putting in place key strategic value drivers to make it not just good but great, and positioning it to appeal to buyers. Buyout's generally need careful planning, although can be implemented quickly in the fundamentals are in place. Acquisitions in contrast often move quickly.
 

Having a plan

Surveys show that the majority of owner managed businesses don’t have an exit plan and find it difficult to think strategically about an exit. Planning needn’t be complex but it’s difficult to step out of the day to day operations of the business to think calmly about the longer term. It’s also difficult for disparate stakeholders or family members to reach consensus. This is when it’s helpful to bring in an outsider. We often work with directors for years to prepare them to secure the right exit.
 

Timing

A successful exit depends on good timing. Sometimes this involves being tactical – going to market if consolidation is occurring in the market. Or it might be driven by the availability of finance to buyers, or indeed appetite amongst financial buyers. In the current market, we’re seeing strong appetite from private equity houses to acquire and to invest in companies. 

Otherwise, it’s about allowing long enough to tune up the company performance and get its fundamentals in place including the succession of management. If the owner manager is critical to the business they may need to do an extended hand-over.  That should be factored in the exit timetable leading up to a target retirement age. So too must the time taken to sell the business which is typically between 6 – 9 months. 
 

You have options

Remember that sale is rarely the only option. At PEM Corporate Finance our role is often to highlight the different options and to review their relative desirability and feasibility. If you have a plan, and build a strong company while focussing on the value drivers that would appeal to a buyer, you will also be building a resilient and valuable asset. This opens up the possibility of alternative exits through a management buyout, a family buyout, or the sale to an Employee Ownership Trust. 
 

Exit advice in six words or fewer

If I had a limited time to advise on exit strategy I’d say “plan early and give yourself options”. We’re running Business Exit Strategy seminars which give an expanded version of that advice including the choices of exit, tax planning, valuation and strategy at venues in Cambridge and Norwich in June – visit www.pemcf.com/events for information and booking.

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Lake Falconer

Corporate Finance Partner
Lake leads the PEM Corporate Finance team on MBO, acquisition, disposal, succession and strategic planning. He also heads up PEM’s valuation team providing business valuations for shareholder exits, disputes, business planning and regulation. Lake has over 30 years' senior level experience as a business adviser and as a manager in industry. He holds the ICAEW corporate finance qualification.

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