This deal could help save our planet

Thanks to WWF for this image

Sometimes we are privileged enough to work on a deal that can make a real difference. The sale of Predict Ability Limited is one of those, Chairman Bruce Menzies explains:

My name is Bruce Menzies. I am a civil engineer. I am Chairman, co-founder and director of Predict Ability Ltd (PAL). My fellow co-founders are Richard Clarke, a chartered chemical engineer, and Edward Coe, a financial software specialist. We founded PAL in 2015. Richard’s vision for PAL was to research and develop the worldwide price for carbon that was being called for by the UN, IMF, the World Bank and the IPCC (Intergovernmental Panel on Climate Change). We did this by assessing the loss and damage of insured and uninsured extreme weather events (hurricanes, flood, landslides, drought, forest fire…) that were attributable to the burning of fossil fuels. This price was expressed as dollars per tonne CO2, not simply tonnes CO2. This was a carbon tax-in-waiting for countries and corporations. December 2018 was a watershed. The UNFCC COP24 conference in Poland could not agree on who would do what about global warming. Meanwhile, in Paris the violent gilets Jaunesprotests showed citizens would not accept a carbon tax.

Additionally, the climate emergency was becoming obvious. Accordingly, we developed financial risk metrics for the impact of climate and climate change. We argued that corporations who embrace ESG (Environmental, Social Governance) and who practice Responsible Investing (like disinvestment in fossil fuels and investing in energy renewables) are more successful than those who do not – let the markets save the planet!

To deliver this vision required a senior partner with deep pockets. We were self-funding thus far and so owned the Intellectual Property outright. We turned to Weybrook Business Brokers Ltd to sell the business. Rupert Trevelyan immediately saw the intrinsic value in our IP. He grappled with our difficult science and came to understand it very well indeed. We started talks with a global financial services company. They are Global Corporate Financial Advisors with their HQ in the Netherlands and offices in London, Switzerland, Hong Kong and Canada. They have over 500 clients that are managing three trillion Euros. They were a natural match with PAL, having set up a Climate and ESG Solutions group that they wished to expand. On September 30th, 2019, PAL merged with the company., with the pre-merger talks overseen by Rupert. On November 1st, Richard and Edward started working for the new joint venture. – a very successful outcome for all concerned.

Dr Bruce Menzies
Chartered Engineer
Chairman, Predict Ability Ltd (PAL)

If you want Weybrook to help sell you business click on this link

Is your Business Fit to Sell?

Selling your business?

If you want to sell a car or house, it is much more likely to sell if it is in good working order and looks the part. It also has to be on the market at a realistic price to attract appropriate interest and buyers. The same applies to selling a business.

All too often when I sit down with owners they believe their businesses are ready to list for immediate marketing. However, the reality is that if they had put measures in place over a period time prior to listing they would be in a much stronger position. Recently, I met with an owner who wants to sell a very profitable business. Turnover and profit have doubled in the last 9 months on the back of a new contract, which looks fantastic. After a bit of unpicking, a picture emerged of significant fluctuations in turnover and profit over the last few years based on contracts won and lost. In addition, the business has a high dependence on the owner and his business development skills. If the current owner walked away a potential buyer would be taking a substantial risk. On the one hand, it could flourish, but on the other, the contracts may not renew and the business could fall away.

If you are planning to sell your business you need to make a plan which might take several years to enact. Many entrepreneurs are skilled at growing and running their businesses but need guidance to put in place their exit plan, which is why Weybrook Business Brokers offers support for owners who are preparing their businesses for sale. https://www.weybrookbusinessbrokers.com/preparing-your-business-for-sale/

Here is a checklist for preparing your business for sale:
1. Why do you want to sell?
Make sure you know why you want to sell and what you will do once you sell.

2. Get your Finances in order
Buyers want good records of business performance (at least 3 years trading accounts) but you will need to be in a position to convince them that their acquisition will deliver profitable growth going forward. Plausible forecasts and business plans will provide buyers with the necessary confidence to purchase your business.

3. Make sure your business is fit to sell
To make your business attractive to buyers it must be in a position to transfer effectively to new owners:
• Strong second-tier management team in place capable of running the key elements of the business once you have exited
• Key supplier and customer agreements secured
• Shareholder agreement (of the sale)
• Evidence of sustainable profitable growth
• Any legal issues resolved
• All paperwork up to date and in place (contracts, agreements, leases, trademarks, employee contracts and benefits).
• It may be necessary to put a 1-5 year plan in place to ensure your business is fit to sell.

4 Decide how you are going to sell.
Selling a business is time-consuming and complicated. This could easily divert you from running it, which might lead to a decline in performance driving down the value and making it less attractive to buyers. Our advice is to assemble a team of professionals to help you market the business. This team should include: your accountant and or finance director; a broker to market your business and a good commercial lawyer to tie up the contractual issues.

It is critical that during the sales process you focus on business as usual and let the broker find a buyer.

We hope this article was helpful. If you would like help putting together a plan to ensure your business is fit to sell, we have a number of packages to help you produce a plan https://www.weybrookbusinessbrokers.com/preparing-your-business-for-sale/? We can also act as your broker https://www.weybrookbusinessbrokers.com/sell-my-business/

Buy a lifestyle business?

It is summertime, the sun is shining and the grass has green lushness to it………. everything is great…. but you are frustrated in your career, you may want to consider buying a business. If you know what sector you are targetting that is great news, start the search now.

For many buyers targeting a sector doesn’t come naturally, so one approach is to find a “lifestyle business” that can become a way of life. At Weybrook Business Brokers we have a variety of businesses on sale at any one time, there are three, in particular, that may be of interest to lifestyle buyers.

Firstly we all know mental health and well being are coming into focus in all walks of life and not a moment too soon. If you are active and keen on events businesses, we have an exiting wellbeing company that combines exercise and healthy eating. See the link
https://www.weybrookbusinessbrokers.com/exciting-wellbeing-company-which-combines-healthy-eating-and-exercise/

For those who want to sail off into the sunset and have sailing in their blood, we have a leading boat brokerage for sale. Find out more https://www.weybrookbusinessbrokers.com/leading-boat-brokerage-for-sale/

If you are practical and can handle basic plumbing and electrics why not consider taking on an irrigation contractor (domestic and commercial) whose like for like sales has grown more than 100% in q1 this year. See https//www.weybrookbusinessbrokers.com/domestic-and-commercial-irrigation-business-:2/

If you want to know more about these businesses or any business we are selling call Rupert Trevelyan on 07826 050690 or email
rupert@weybrookbusinessbrokers.com

How to value a business in the current marketplace?

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In August 2018 Weybrook Business Brokers conducted research with business buyers to determine how they value businesses, we haven’t updated the research but the findings remain intact in mid-2019.

There is an old cliché that states that;” your business is worth what a buyer is prepared to pay for it”, whilst this is true, most sellers need a realistic valuation range before making a decision to put their business on the market.

A common mistake is overvaluing a business and therefore deterring potential buyers. If the buyer is going to the financial markets to borrow money to fund an acquisition, then the business must generate sufficient profit top service that debt and give a return on the investment on top.

Commonly we see offers staged over a number of years where the buyer uses the cash generated buy the vendor at agreed timescales. These deals are not popular with sellers but in a market where financing is tough, sometimes they are the only deals around.

The message is clear – profit is a key driver of positive valuation, so if you want to sell your business at a  good price, being able to demonstrate a trend for profitable growth is a key priority.

Our 2018 findings are shared below.

Valuation model

Two-thirds of respondents use a multiple of EBITDA (earnings before interest, tax depreciation and amortisation) a quarter use a multiple of PE (price earnings ratio) and the remainder use DCF (discounted cash flow) as their valuation models. A minority of buyers see tax as a legitimate cost and therefore use PE as their valuation tool.

Valuation multiple by sector

The mean valuation multiple currently being paid by sector is shown below:

The highest multiples are being paid in the Digital / IT sectors with the lowest in Food/ Events / Hospitality but buyers do point to future value/cash flow being the key driver of how high the multiple is. The multiples paid by valuers using PE as a valuation tool were up to 1 point higher than those used for EBITDA. The multiple for “other sectors” came to 4.

Valuation multiple by profitability / EBITDA

The trend for higher multiples being paid for more profitable businesses is born out by the mean scores below:

Buyers will typically be happy to pay more for companies with real profit growth prospects.

How much will buyers pay on completion of the sale?

The answer here varies between 0 and 80%, with the mean score being 49%. This is not what most sellers want to hear, as earn outs have a bad press, with the fear being that new owners will manipulate future profitability in their favour. However, the research suggests that sellers will have to be realistic.

How long will the staged completion payments take?

With only half the fee being paid on completion, the full amount is likely to be paid anywhere between 1 and 4 years after completion.
• 25% will complete after 1 year
• 25% will complete after 2 years
• 37.5% will complete after 3 years
• The remainder are likely to complete within 4 years

2019 trends observed

In 2019 we have observed a number of buyers who offering a multiple of three to four times net profit (+ cash on some occasions ) as a valuation tool.

So what are the conclusions?

The majority of buyers use a multiple of EBITDA to value a business they are looking to purchase. The multiples do vary a little by sector and will increase for businesses that generate higher profit levels. The multiples typically start at 2.75 for businesses generating an EBITDA less than £250k and rise to 6 for businesses generating over £10m. This research confirms that buyers are currently paying conservative prices in the current market. The majority of offers coming in at the moment are for multiples under 3 times EBITDA.

The article was updated in May 2019 and the research was conducted in August 2018 and the survey was sent to over 50 regular business buyers. The response rate gives us the confidence to publish the results, showing a good snapshot of current business buyer intentions, but the survey cannot be said to be a definitive UK Market survey.

So you want to buy a business?

 

Running and owning a business is a dream held by many of us? There are two main routes the first is starting your own business from scratch and the second is to buy an existing business. As a broker, Weybrook helps to facilitate the second route!

The advantages of buying

By buying a company you will be taking on an existing business that if you have done your research is already successful in its marketplace and capable of delivering sufficient cash flow to fund your future aspirations. It also means that you can operate effectively from day one without having to experience pains of starting a company from scratch. The advantages include:•

  • A proven working business model
  • Existing product or service
  • Cashflow
  • Premises and equipment
  • Existing customers and suppliers
  • Employees that know the business
  • Systems and processes in place
  • Reputation and brand name
  • You are up and running without having to build  a business from scratch
Considerations

Taking on a business is a serious undertaking and will require a considerable commitment of time and capital. A buyer will be required to make a large investment up front, provide sufficient working capital to keep the business moving forward in the takeover period and beyond, plus be prepared to invest in parts of the business that may have been neglected or need stimulating to generate growth.

As a cautionary note, you should do considerable research into the company you are buying and the marketplace it operates in. Understanding the sellers’ reasons for exiting is always extremely useful to a purchase decision.

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Deciding which business to buy

This is one of the most important decisions a purchaser will ever make, so it is worth investing time and effort into researching your target. Corporate purchasers will invariably have strategic reasons for making a purchase, which will guide their search. Private buyers and investors need to take into a number of considerations

  •  What sectors do you have expertise and interest in?
  •  What skill sets do you have and how do they match those requires to manage your acquisition?
  •  Do you have (sufficient) funding in place to fund the purchase of the business, including stock at value and provide working capital to keep the business operational in the takeover period and beyond.
  •  Will the business generate a sufficient return on investment?
  • Is the majority of your capital funding property or a working business?
  • Are you sufficiently committed to the business to drive it forward successfully and how does this fit in with your work life balance?
  • The employees are critical going forward
  •  Are the employees committed to staying with the company?
  • Is there a strong management team capable of managing the business day to day?
  • Are any of the customer relationships dependent on:
  •      current employees?
  •      the current owner and if so how are you going to hand over and protect            that relationship?
  •  Is the business located in the right area for you and is it relocatable if it isn’t?• Do plenty of research – it is worth it.

Take a look here at the sort of businesses you can buy

The buying  process

https://www.weybrookbusinessbrokers.com/acquire-business/

Information Request

Once you have decided that you are interested in a company, you will request information and will be required to sign an NDA (non-disclosure agreement). If the company is being sold through a broker these requests will be directed through the broker

Open negotiations

Once you have sufficient information negotiations can begin with the current owners and the parties can together to build a deal that will satisfy all involved. One of the first points of negotiation will be price, At this point initial offers are not legally binding.

Spend time formulating a plan to work towards so that everyone is pulling in the same direction.

Evaluate the business

This is the stage when you will do a full evaluation of the organisation; how it is trading and what assets does it have and what are they are worth to you. You may well be advised to use a  specialist accountant to provide relevant expertise in a certain field or industry that can help inform your offer.

The Heads of  Terms Agreement

This where you bring together the key elements of the sale into a single document. This very important in marshalling the deal and parties involved ,and is usually drafted by a commercial lawyer for the buyer.

It includes:

  •  Payment details,
  •  Responsibilities,
  •  Confidentiality
  •  Timetables and deadlines
  •  Completion
Due diligence

At this point in the buying process, you will be familiar with all the details about the company you are buying and the sales process. This is the stage where you bring in the professionals (lawyers and accountants)  to  do a detailed check/analysis covering

  •  The accounts and finances
  •  All legal documents including: leases, contracts, shareholder agreements
  •  Operations
  • Staff
  •  Business practices
The Sale and Purchase Agreement

Once due diligence is completed you will lawyers will finalise the Sale and Purchase Agreement (usually drafted by the purchaser’s lawyers)This is the legal document that lays out the legal obligations of both parties and will signal the closing stage of the acquisition process.

Payment

The next step is payment as laid out in the Sales and Purchase Agreement. Depending on the scale  of the purchase there are a number of payment approaches:

  • Loans
  • Business Mortgages
  • Cash
  • Peer to peer lending
  • Investment ( this can involve relinquishing partial or substantial control)
  •         Angel investors
  •         Venture Capital
  •         Other companies
  • Private means
  • Larger acquisitions can involve complex financing from multiple sources.
Completion

Once the final documents are completed, contracts signed and payment agreement in place, the business acquisition is complete.

If you want to know more contact us on 07826 050690 or via this link

 

 

 

Information you will need to compile when selling your business

Information Required When Selling Your Business

Once you have decided to sell your business you will need to put together an information bank. The more preparation you do up front, the smoother the selling process will be and you will be less likely to face hiccups and delays during the due diligence process.

Listed below is the key information that you should put together:

Financial

• Annual accounts (At least 5 years, this is essential information to have up front)

• Up to date profit and loss account, balance sheet and cash flow forecasts

o Details of the cost base and administrative costs

• Details of any loans and outstanding debt • Forecast for next year and if available a 5-year plan

• Details of assets owned (property, vehicles, machinery, stock, fixtures and fittings)

• Stock at value•

. Details of accounting infrastructure

Sales

• Sales figures; split by:o Revenue and volume o By product / service type

o Key customers

o Forecasts for the next year and the remainder of this year

• Key Customers

o Sales

o Contract details

o Length of tenureProducts and services

• Details of key products and services provided

Suppliers

• Key suppliers

o Turnover

o Contract terms

• IT and infrastructure

People

• Details of staff

o Numbers of staff including directors

o Job roles and descriptions

o Organogram

o Names of staff (brief biography and tenure details)

o Salary and benefits details

o Contracts

Legal

• Details of company legal status

• Shareholders details ( all shareholders need to be in agreement to sell)

• Details of contracts and leases

• Details of outstanding judgements or legal issues

• Details of intellectual property rights and copyright

• Registered brands and domain names

Premises

• Property details

• Owned or rented. – leases and deeds• Tenure

• Co-tenants / agreements

Sales and Marketing

• Website, social media & domain details ( webmaster, domain name, hosting details)

• Sales and Marketing plan details & costs

• Images and packaging details ( provide good images to help sell your company)

• Data – what data do you hold and what is your GDPR plan?

This list is not exhaustive, but if you can provide the majority of this information you will be very well placed to sell your company. If you don’t have it up front, you will more than likely be asked for all or most of it by a prospective purchaser. Failing to provide it, could slow down, or even halt your sale!

My chance to take a view on climate change and make a diference by selling a Carbon Pricing Specialist

As a farmer’s son I have always been a keen observer of the weather and how it affects the flora and fauna it comes into contact with. There is no doubt in my mind that there are very noticeable clues that our climate is changing.

There is also no doubt in my mind that climate change has always been a factor, much of Britain was once covered in ice and that ice has retreated significantly since these islands were in the grips of an arctic climate. Indeed ice ages have come and gone many times. Previous changes have been driven by mother nature, what is different this time is that mankind is accelerating the change with our carbon emissions.

The majority of rational opinion seems to accept that we are accelerating that change and there is now significant scientific support for this view too. We know there are some significant climate change deniers too. Whilst opinion is moving into acceptance mode, our actions as individuals, organisations, and governments are lagging behind.

True the Paris Climate Agreement which was signed by c. 174 countries in December 2015 looks to limit global temperature gains to well below 2 degrees centigrade this century and most signatories intend to play their part, but it is a voluntary agreement being put at risk by none less than the President of the USA.

Global warming, caused by CO2 emissions released into the atmosphere by burning fossil fuels, currently costs global GDP a staggering $1 trillion in damages p.a. Small wonder the UN, IMF and World Bank have all called for a carbon price: policy makers in government and corporations urgently need this price so they can account for the true cost to humanity of their decisions, activities, and investments.

I firmly believe every one of us has to play their part in challenging the naysayers and to make a contribution to protecting our environment and climate. As well as making lifestyle changes I am delighted to be marketing the World’s first scientifically based carbon pricing company.

Way ahead of the curve, the company I am bringing to market is the ONLY one in the world to have scientifically determined the true carbon price, based on the loss and damage caused by extreme weather events attributable to manmade climate change. This company alone can put a scientifically accurate $ price on this: dollars per tonne CO2 – not just tonnes of CO2.

This company’s exclusive, world leading IP and technology enables a huge range of unprecedented capabilities including: monetized carbon auditing of big-ticket projects like nuclear power plants; measurement of carbon liability of, say, proven reserves of oil companies; assessment of carbon liability Value at Risk (VaR) for asset managers across all industry and energy types including renewables.

So if you want to take a global leadership position in auditing your carbon usage, liability and the what value yours and other organisations have at risk, click on this link and if you are serious I can introduce you to the team.

I am not a climate scientist, climate expert or even a campaigner, but care passionately about this planet and the legacy we leave for future generations. So if I can find a buyer for the company I am representing, whom gives it a platform to ply its trade on a global stage, then I believe I will have made a small (albeit very) contribution to saving this planet. If you know a policymaker, asset manager, consultancy or government or academic body or corporation that is brave enough to take a global leadership position in carbon pricing then please pass this message on.

Rupert Trevelyan 

www.weybrookbusinessbrokers.com