Is my business ready for a sale?
This is a question we are asked frequently when talking to new clients. There are a number of areas to consider, and can vary from sector to sector, but in our 30+ years of selling companies, there are four main points we consider when taking on new clients:
Is there management succession in pace?
Shareholder reliance is a topic that prospective acquirers will cover. Have you set up processes in your company so that you can take time away and the business still runs efficiently without you? Or are you working 60-hour weeks and fire-fighting in evenings and at weekends? Can you trust your staff to make good decisions when you’re not there? This isn’t necessarily a barrier to sale, but it can raise issues of risk. If you are the lynchpin to the success of the company, an acquirer is going to want to buy you as well as your company, and tie you in to its success. The more distance you can get, the more comfortable a buyer will feel. A formal management structure, with processes and reporting lines in place can really help instil confidence.
Do you have a stable and varied client base?
Do you have a large client base, or are you reliant on one main customer? Have you got 100 customers, or just three? Again, this needn’t be a deal breaker, but it does raise the buyer’s perception of risk. If all of your eggs are in one client’s basket, it may be worth taking steps to reduce this reliance before going to market.
Are your internal processes and policies up to date?
This is an area that can affect a sale further down the line, in Due Diligence. Before you go to market, it is a good idea to make sure your employment contracts, HR procedures and policies, such as anti-bribery policies are in place. Housekeeping of this sort is never a waste of time, and will be of immense value once you are into the nitty-gritty of DD.
How are your financial processes?
Processes are a pain point, especially when it comes to financials. How robust are your financial processes? Do you produce management accounts? Are your accounting practices consistent year-on-year? Clean, well represented accounts can mean the difference between a smooth DD process and last-minute price chipping.
Here to help
Of course, as I said at the top, none of these issues are necessarily a deal breaker, but they can mean the difference between a smooth, relatively pain-free process and avoidable headaches on your journey. If you are unsure whether your business is ready for sale, we are happy to discuss this and any other questions with you, and help you pinpoint the areas that may need addressing.
If you are thinking of selling your business and would like to explore your options with Kingsbrook, please get in touch, either by email at [email protected] or call us at 01635 736741.