When’s a good time to be selling your business?

Are you considering selling your business? If so, I’ve got a few questions for you, to expand your consid

In my role as a growth and M&A specialist, I often get involved with business sales transactions. My associates and I at Stylequity may represent the sellers or the buyers. We always look after everyone’s interest, both in the short and long term. We question the seller’s motivation, timing, and proposed assets for sale, to make sure the owner of the business knows what they are getting into, why, and whether they are doing the right thing by selling. In the next few minutes, I’ll take you through our process, our way of thinking and our results. 

Is it the right decision?

When business owners approach us, wishing to sell their business, we ask 3 questions to understand their motivation for the sale:

Why? There are many reasons to sell a business, and sometime selling the company isn’t the right answer to the issue they are trying to solve. 

When? Is this an urgent sale? Is the owner willing to stay on for a few years? How long for?

To whom? Is it an internal sale (a MBO, for example), or selling to an outside buyer? Sometimes the owners have been approached by their management team, or a client, or a competitor. Those factors will shape our approach to the sale process.

Is now the best time? 

Once we understand the motivation or rational for the sale, it’s important to us to understand the timing factor.

Our goal is to make the most money possible for the owner. Of course, success fees are percentage based, so we are looking after our clients’ interests, as well as our own. As we are not business brokers, we’re not motivated by “flipping” the business “as is”. We are motivated by increasing the value the shareholders of the business get from the sale.  This means, that we understand how buyers think, and evaluate businesses, and the risks associated with buying existing businesses. Therefore, we make sure the business is currently in an optimal position to sell. If we think there’s more value to be extracted from the sale of the business, we will advise the owner to wait, prepare and sell at a better time. 

What are you selling?

A business is a complex sale. There are various components to consider, and each component and sale structure has various implications, such as tax, employees, relationships, etc. 

Together with the shareholders, our team will strip down the business to the various components, and create a structure which will help a smooth transaction, and make sense to both sellers and buyers. There’s no point in offering a structure to benefit the shareholders, but one which won’t be attractive to a potential buyer. 

We look at the sale of the whole business as an option, or selling components such as tangible assets and IP. 

Valuing the transaction

Once the sale structure is determined, we are often required to appraise the value of the transaction. We work with the business and their accounting support, and bring industry experts to determine the likely value of the business. The value of the business (or Enterprise Value), is the baseline for discussion about the transaction value. There are 4 main business valuing methods, depending on the type of business and its’ industry. 

Of course, the buyer might have a different approach to valuing the business and/or the transaction, which we will go through during the negotiation phase. 

Finding the right buyer. 

Our clients’ enterprise value, and transaction size, require us to apply careful consideration in our go-to-market approach. Advertising a mid-sized business for sale, can have an adverse impact on the business during the advertised period, which will reduce the value, and the ability of the business owner to sell the business at all.. It’s a period of uncertainty for everyone, including suppliers and customers, not to mention employees.

In order to minimise that impact, Stylequity team will research and come up with a list of potential buyers (including industry players, Private Equity or family offices), and approach the business confidentially to gauge interest first, and then talk to the right person within the business to negotiate the terms. 

We do not use boards, brokers, or any other form of advertising. We run a very strict and targeted sale process. 

Preparation for the sale. 

During the preparation period, our team will collect all relevant documents expected to be required during the Due Diligence process. Every buyer is different, like every sale process is different. Yet our experience allows us to prepare a pretty tight data room, which will include the commercial, legal, accounting and promotional data generally required during the process. 

During various stages of buying negotiations, we will release the appropriate materials to be viewed and analysed by the buyer, in a very controlled manner to protect the interests of the seller.  

Terms Sheet and contract Negotiation

Stylequity entire business is built on reputation. Therefore, our sole aim during the negotiation phase, is to make sure everyone is happy. It may sound like a cliché, but a Win-Win feeling for both buyer and seller, is a must in our business. Especially when you consider that both buyer and seller will need to work together for the next 2-3 years, until the transaction is final. Both seller and buyer need to be excited for the future, and happy with the term of the negotiation. 

In addition, our approach makes everyone involved in the negotiation at ease and relaxed,  due to the confidence they have in our ability to bring everyone together for a mutually beneficial transaction, by professionals who know what they are doing. 

Our greatest testimony came not just from our client, a seller of his business, but from a buyer, who appointed us to buy more business for him, as he enjoyed the process of working with us as a buyer of the business, i.e. sitting on the other side of the negotiation table. 

After sale integration

This is the stage where Stylequity really shines. During the sale process, which can take quite a few months, we get to know both businesses, the buyer and the seller, pretty well. This knowledge helps us get involved in the integration of the two businesses. We may get involved (depending on the situation) in educating the market about the transaction, help streamline internal processes, restructure the workforce, integrate systems and other issues as arise from merging two businesses together.

A side note about the human element of selling your business.

 Most mid-tier businesses I come across, are the owner’s babies. There’s an emotional attachment to the business, after a few decades of dedication and hard work. In many cases, that business defines the owner, and that’s all they think they are. It is quite common for owners to get emotional throughout the sale process, and finding it difficult to let go. I get it. I really do. As a business owner myself, seeing my own business grow, tumble, struggle, succeed, side-swiped, succeed again, and all the ups and downs of running the business, it’s very hard taking a holiday, let alone selling it and saying a final goodbye to a significant part of your life.

When we encounter such emotional attachment, we tread carefully, to guide you through it. Although it’s not always easy, but it certainly be done. So, if you are considering selling your business, call me for a confidential, obligation free discussion. Coffee’s on me!