How do I sell my business? Timing, the right team and the process

It is one of the most common questions we are asked by owner-managers, and one of the most important decisions they will ever make. Selling a business is rarely a single moment. It is a process that starts long before a buyer is found, and the outcome depends as much on timing, preparation and the team around you as it does on the business itself.

Is the time right for your business?

The best time to sell is when you do not have to. Buyers pay for momentum and certainty, so the strongest outcomes usually come when a business is trading well, with a track record of growth and a forecast it is on course to deliver. Selling on the back of a difficult year, or because you feel you have to, puts the buyer in control of both the timetable and the price.

Before thinking about a sale, it is worth asking some honest questions about the business.

• Trading momentum. Is the business growing revenue or EBITDA by around 10 to 15% per annum, with margins in line with or above the industry average, and can you evidence where future growth will come from?
• Management team. Could the business run successfully without you, with a team in place that a buyer would want to back?
• Financial information. Are your management accounts timely and accurate, and do they reconcile to your statutory accounts?
• Risk. Is there a reliance on a small number of customers, suppliers or key people that a buyer would see as a risk?

If the answer to any of these is no, it does not mean you cannot sell, but it does mean there is value to be gained by preparing first. Our article on Exit Readiness and the importance of preparation covers these areas in more detail.

Is the time right for the market?

Timing is not only about your business. The value you achieve is also shaped by the M&A market at the point you sell, and conditions change from year to year and from sector to sector.

• Buyer appetite. Are trade buyers and Private Equity actively acquiring in your sector, and are larger groups consolidating the market?
• Funding and interest rates. The cost and availability of debt affects how much buyers can pay and how deals are structured.
• Valuations. Recent transactions in your sector give a guide to the multiples buyers are paying today.
• Tax and regulation. Changes to the tax regime, including the reliefs available to shareholders on a sale, can affect the net proceeds you receive.

An experienced M&A advisor can tell you how the market views businesses like yours, which buyers are active and how that is likely to affect value, so you can choose the right moment rather than react to it.

Prepare early

The owner-managers who achieve the best outcomes typically start preparing one to five years before they plan to sell. Putting the financial reporting, legal and tax compliance and the management team in order ahead of time increases value, reduces the risk of a deal falling over in due diligence and shortens the process when you do go to market. It also gives you options, so that if the right buyer approaches earlier than expected, you are ready.

Build the right team of advisors

A sale touches every part of the business and every shareholder personally, so no single advisor can cover it all. In our experience the best results come from a small, joined-up team, each covering a different aspect of the transaction, with you at the centre.

• M&A advisor. Your first approach should always be to an M&A advisor, who acts as the lead and runs the process from start to finish. They value the business, prepare the marketing materials, identify and approach buyers, negotiate the deal and project manage the process through due diligence to completion, coordinating the rest of the team along the way.
• Corporate tax. A corporate tax advisor makes sure the transaction is structured efficiently, both for the business and for each shareholder as an individual, including the reliefs available and any clearances needed from HMRC.
• Corporate legal. A corporate lawyer drafts and negotiates the Sale and Purchase Agreement (SPA), the warranties and the disclosure letter, and manages the legal steps to completion.
• Wealth management. A wealth manager helps you plan for the proceeds, from investing and protecting the capital to pensions, estate planning and supporting the next generation of your family.

Together, this team gives you the highest chance of reaching completion, makes the deal as efficient as possible for the business and for the shareholders as individuals, and makes sure you and your family have the right support in place after the transaction, when the dust settles.

The M&A process, step by step

Every transaction is different, but a typical sale follows a well-trodden path. Once the Exit Readiness work has been done, the process from engaging an M&A advisor to completion usually takes nine to twelve months.

1. Engagement and preparation. We agree your objectives, prepare a valuation and the equity story, and produce the information memorandum and a long list of potential buyers.
2. Approaching buyers. Buyers are approached confidentially and sign a non-disclosure agreement before receiving any detail, followed by management meetings with those most interested.
3. Offers and negotiation. Indicative offers are received and compared on value, structure and certainty, and we negotiate the headline terms with a shortlist.
4. Heads of Terms. The key terms are agreed with a preferred buyer, usually in return for a period of exclusivity.
5. Due diligence. The buyer and their advisors review the business in detail, covering financial, tax, legal and commercial matters, through a virtual data room.
6. Legal documents. The SPA, disclosure letter and completion mechanism, whether completion accounts or a locked box, are negotiated alongside due diligence.
7. Completion. The documents are signed, the funds are transferred and the business changes hands. Any completion accounts or deferred consideration are then finalised.

You can read more about how we support owner-managers through each stage in our services, and see examples of completed transactions in our work.