How long is it currently taking to sell £500k-£10m T/O companies?

It all starts with you

For business owners, the thought of selling their company can make them quite emotional.

That’s because what an entrepreneur creates when they form, stabilise, and grow a company is an expression and realisation into existence of what they want and desire professionally as a person.

The thought of not running it anymore is strange. What would they do with their lives? How else would they express themselves? What if they depend on this place as much as it might have depended on them during the early and growth phases?

However, despite this, there are two factors which eventually make the decision for them to sell up:

• the payment of a significant lump sum in cash which could solve all current and future financial problems and
• exhaustion – they may have spent 5, 10, 15 or more years building up their business and they don’t want the emotional hassle of running it or trying to expand it again.

The first few weeks after a sale can feel very disorientating but most entrepreneurs have no regret over making the decision.

You may or may not be ready to sell.

The best thing to do if you’re not certain is to speak to business brokers about the process, about the likely sale price, and to speak with other businesses owners who have sold up to find out how they adapted to their new life.

Getting your company ready for market

When you have made the decision to sell, you first need to appoint a business broker.

Your broker’s initial advice will be to involve your accountant and solicitor in creating a “data room”. In previous years, a data room was a secure room which buyers and their representatives could visit to access a takeover target’s documents, contracts, bank accounts, and so on.

Today, data rooms are secure online portals containing the same information. As you, your accountant, and your solicitor build your data room, you and they will gain a true understanding of the business past the day-to-day reporting and accounting requirements you need to run it. This knowledge will be important at the negotiation stages and during the due diligence phase.

When your company is on the market, you, your accountant, and your solicitor should update the contents of the data room every week with the very latest trading and contractual information.

Identifying prospective buyers

While your data room is being created, your broker will begin putting together the marketing materials needed to attract interest from potential buyers.

Working with a professional copywriter with first-hand experience of the business sale process, an information memorandum (IM) will be created.

IMs are presented to potential purchasers following the signing of a non-disclosure agreement and after they’ve provided proof of funding. They contain details on what you sell, who works at your company, how you sell your products and services, and general financial information (profit and loss plus balance sheet).

Your copywriter also creates online adverts, sales letters, teaser documents, and more which the broker uses at various different parts of the marketing process.

But how are buyers identified in the first place?

Very important to understanding and unlocking the true value of your business is to understand what benefits owning it will have to a new buyer. Although many companies are sold to their direct competitors, more are actually sold to companies in neighbouring markets where there is the opportunity to cross-sell and upsell each other’s products and services – in fact, they’re often willing to pay more than a competitor. We either find these businesses direct or through the network of accountants, solicitors, and IFAs we work with.

The search for buyers is not restricted to Britain. Most business brokers including Swan either have presences or partnerships in other countries. The UK is one of the world’s largest and most advanced economies and attracts billions of pounds a year in foreign investment, a significant proportion of that investment being in mergers and acquisitions.

Backing up their direct efforts, many business brokers, including Swan, have developed long-term relationships with venture capital and private equity firms who are keen to take an established business and bring in expertise to scale it nationally or internationally. Your business will be marketed to these firms by your broker here in the UK and overseas.

A growing proportion of M&A activity is carried out by family offices. Family offices are investment businesses whose responsibility it is to manage the wealth of either individual or multiple families. To spread risk across a portfolio, a family office will not only purchase shares in publicly traded stocks but they’ll also purchase companies outright which they have much greater control over.

At all stages, your business broker must understand instinctively the reasons why a competitor, a company in a related sector (or unrelated sector), an investment firm, or a family office would benefit from owning your company and they target their marketing to them accordingly based on their knowledge of and relationships with these parties.

Creating a competitive bidding environment

The other goal for your marketing campaign is to create interest in your business across multiple buyers at the same time to create a competitive bidding environment.

Although the identity of competitors is not disclosed to buyers, their presence is and it’s this presence which often leads to higher prices being achieved at the point of sale.

Competition between buyers is further enhanced by introducing a time restraint to the process meaning that all bids and negotiations must be concluded by a certain time before you make a decision.

It’s at this time where a business broker demonstrates value as many potential buyers will overbid to knock others out of the race with the intention of negotiating a discount on the price you agreed later on during due diligence.

For a business broker who has sold multiple companies, they will advice you on which bidders seem to be displaying that behaviour and let you know your options on how to proceed with them.

Due diligence and the SPA

Once the price is agreed, you, your solicitors, and your accountants will enter the due diligence process with the buyer, their accountants, and their solicitors.

The purpose of due diligence is to let the buyer know exactly what they’re buying to the finest detail. Your buyer’s accountants and solicitors will make multiple requests for information contained in your data room and, in the interests of speed and maintaining trust between you and your buyer, you need to be able to provide all requested documentation as quickly as possible.

While this is happening, your solicitors and your buyer’s solicitors will be working on the sale and purchase agreement – the legal document which governs the takeover and what’s expected of both you and your buyer post-completion (“completion” is the legal term for the sale taking place).

There are frequent hold-ups and disagreements between your representatives during this period which your business broker will often intervene so that they’re overcome.

As the process draws to a close, your team and your buyer’s team will agree on a completion date. Although they are often missed by a day or two, the agreement on a date means that the sale is imminent and both parties work hard to make sure they achieve that.

The most technical sale you’ll ever be involved in

For a successful sale to occur, many different elements need to fall into place at the same time at multiple times from the marketing up to the day of the sale and beyond.

We sell businesses and we always target getting you the best price on the most favourable terms from the most cooperative and open buyers.

From start to finish, most sales of businesses whose turnover is £500k to £10m take up to twelve months to complete from the time you make the decision to go to market.

For an informal, confidential conversation on the types of buyer most likely to be interested in your business and the length of time it would take to sell your company, please call us on 0800 634 9679.