Selling your business?

If you are thinking of selling your business, it is worth taking the time to consider all potential investors’ perspectives before the sale process begins. This will mean you can present your business in the best possible way for anyone who might be considering a purchase to see the value specifically for them.

There are a few value drivers that apply for all investors:

• Your market share and the advantages or otherwise this allows
• The state of the competition in your market
• Growth potential for both revenue and other products and markets
• Stable cash flows
• A stable, predictable, and optimised cost base
• A well invested asset base

Beyond these, different buyers have different priorities and it is important to understand how these influence the value they will place on your business.

Trade buyers

Key investment criteria

• Will the acquisition meet my specific objectives (which may not be solely value based)?

• How quickly and easily can I integrate the business? How can this be done physically, what will be the capital cost, and what is the impact of any differences in culture?
• What is the synergy potential and can this be quantified in the following areas?
  – Geographies
  – Services
  – Customers
  – Sales forces
  – Employee and management structure
  – Procurement

• Does the business have comparable metrics in terms of Key Performance Indicators and accounting policies?

• What will be market reaction to the deal?

Funding banks

Key investment criteria

• How secure is the investment – how much headroom is there in terms of excess cash above the proposed interest payments?

• How good is the business at converting profit to cash?

• Do the growth plans reflect an appropriate investment in working capital and capital expenditure?

• Does the proposed funding adequately reflect seasonality?

• What is the worst case scenario and will we still get our money back?

Private equity investors

Key investment criteria

• Will the investment meet my investment criteria (IRR etc.)?

• Do I see suitable growth (bolt on acquisitions, diversification) or other optimisation opportunities (working capital management, price positioning, operational realignment, outsourcing options)?

• Can risks and opportunities be quantified to enable a detailed valuation model to be established?

• Is this an attractive sector with strong market fundamentals?

• Can the management team deliver on the plan?

• What is my exit route?

If you are considering a sale at any point in the short or medium term and are having trouble answering any of these questions, please get in touch with James Maynell at james.maynell@ballardsllp.com or your usual Ballards LLP contact.