I often get asked: ‘when is the right time to sell my business and how do I know?’
As ever, with such important decisions the answer is not straightforward, and while you might be a key player in the decision-making process you almost certainly won’t be alone in deciding whether to sell.
There will typically be numerous other stakeholders to satisfy from your own side, each with their own perspective on any deal.
First thing to say is beware; while these stakeholders may not be significant in terms of shareholdings they can have a huge influence on whether a deal goes ahead and unless they are reasonably satisfied they may scupper an otherwise successful deal.
Timing is an important consideration here as some in your business may want to keep going and continue to grow the business while others want out now.
The most obvious potential conflict will be between the business shareholders and senior management who actually run the business.
Market conditions like this are ideal and you really should consider striking a deal now, if you can, as these buoyant conditions will not last forever.Another conflict may be between different shareholders, with some wanting a bigger slice of the pie and willing to stop the deal if they don’t increase their value.
A word of warning when setting out on a new business venture is to get in place effective ‘drag along’ and ‘tag along’ clauses as this will be vital when you come to sell.
It is by no means impossible, but the message is to make sure that all important stakeholders are looked after when putting a deal together as buyers will be very sensitive to unhappiness in the target purchase.
Another vital component to think about, and high up as a priority, is to think: ‘is my business in good shape for a sale and is it going to be attractive to prospective buyers or is there work to be done first?’
If there is work to be done then the first thing is to make any changes that may be needed to increase the marketability and therefore the price that can be achieved.
You might have to delay your sale, and quite significantly, while you make these, sometimes difficult and costly changes, but you really don’t want to be involved at the wrong end in what will be a fire sale otherwise.
The final point on this is to make sure your management information is comprehensive and up to date as during the due diligence process you will need to validate your claims.
The other, perhaps most important and obvious thing that makes complete sense is to sell when the market is hot with a lot of buyers looking around with wallets full of money to spend.
Obviously market conditions like this are ideal and you really should consider striking a deal now, if you can, as these buoyant conditions will not last forever and there are many instances where people regret not having taken the opportunity to sell when it was there.
Taking advantage of market conditions is a must. We have seen in the financial services sector in the past few years extremely favourable conditions for buyers with numerous adviser consolidators and private equity buyers with deep pockets looking to buy up and consolidate.
Looking at things from a more individual and personal level are things like, 'do I actually want to sell?' or 'do I want to keep working in a job and business that I love, and perhaps sell in a few years?'.
The alternative to working may be retirement, which is something that you just aren’t ready for and indeed dread. Against this you may have been working in the business for many years without getting cash out and really you do want money you deserve now, to enjoy while you are young enough.
In these circumstances there may be a hybrid arrangement available, which appears to be getting more common, and that is to sell part of the business now to an investor partner who is willing to put finance into the business to grow it faster while supporting you in your leadership role.
This will allow you to access capital to reward your hard work and progress made so far while keeping on building the business, and at a faster rate, with the additional finance, until you are ready to exit and taking a second, and hopefully, bigger payout.
Bill Vasilieff is chairman of the UK board of Soderberg & Partners and former chief executive and co-founder of Novia, which he sold in 2020
