Receiving an offer
Receiving an unsolicited offer for your business does happen – several of our clients come to us having experienced this exact scenario. If you have received an offer, here are a few tips for you to consider.
The first thing you’ll need to do is decide if the valuation is fair, by either researching your sector, or by speaking to an impartial advisor. You will also need to consider whether there could be a better valuation out there, or indeed if there could be a better home altogether for your business.
As well as deal structures and valuations, there is also the long-term compatibility this buyer brings to your business. Does this buyer offer your staff the opportunity to thrive and develop, and does it offer your business growth opportunities?
Finding the best buyer may involve spreading your net wider than this initial offer. At Kingsbrook we believe in choice, and research a wide range of potential buyers so that a client can be sure they have found the best home for their business.
The importance of competition
It is never a good idea to accept the first offer you receive. There is always room for negotiation in a sale. When a buyer knows they are the only option for you, the power is on their side, and they can dictate the asking price. If they find themselves in a competitive environment, their mindset has to change from ‘how little can I pay’ to ‘what is this business really worth to me?’
At Kingsbrook we talk a lot about competition, and the importance in driving value – it is something we believe passionately is the main way to ensure you are getting best value for your business. Do you think your business is worth more than the valuation your buyer has provided? If so, this is an area you may want to explore.
Different deal structures
The structure of the deal offered can be a confusing and overwhelming topic. Deal structures can vary greatly, and can involve a range of conditions and time restraints. They can contain deferred payments, earn outs (often including profit hurdles in order to trigger payment events), and put and call options (which involve retaining a small shareholding with future liquid events tied in). If you agree to an earn out, are the targets in place attainable? How long will you be tied in? You will also need to consider whether your buyer is financially sound – if there are deferred payments in place, will the company have the future funds to honour them?
Hiring expert advice
With so much to think about, it is sensible to hire experts to guide you through the process. We would recommend the following to ensure you end up with the best result for you.
An impartial advisor – they will help you with providing commercial advice, negotiating terms, and checking the financial standing of the acquirer.
A solicitor – a must when it comes to ensuring the sale agreement is legal and that there are no hidden surprises. In our experience there are two types of solicitor: ones that drive a deal to completion, or those that nit-pick a deal to death. We work with a panel of lawyers that we know will do a good job for our clients. Your advisor should be able to recommend a selection for you to choose from.
A tax advisor – to ensure you get the most out of your money, both during and after the sale.
Finding the best deal for you
In our experience, the best deal for you may not necessarily the one with the highest valuation. Considering the overall deal structure and the future of your company and staff will pay a huge part in your decision. Many of our clients have ended up going with a lower offer because the overall structure was more beneficial, or because they knew the company was in the best hands. Only you can know what the best deal for you looks like – utilising this advice can help you find out what that is.
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.