Insights from interactions this Month After a number of base rate rises from the Bank of England and rising interest rates there is increasing caution in the market. This does not mean that there is a fall in buyer enquiries, it means buyers are applying greater levels of scrutiny to ensure that they can satisfy lending criteria. For example, one seasoned buyer has found that lenders will only make loans available up to 2 times EBITDA for target acquisitions, so he is having to put together multi supplier / source finance packages in order to complete deals. In June we completed the sale of a wholesaler in the water treatment sector to a US based multinational. The trend at the moment is for potential buyers to come from across the globe. We have been talking to interested parties from US, Europe, India, Dubai, South Africa and the Far East. Sectors that have been generating the most interest are building services, manufacturing and online.
Tip of the month Sellers need to be creative and flexible when agreeing to sell their business. With the supply of finance being tight sellers may need to agree to an installment payment plan over an agreed timescale to secure the completion of a sale. The plan could be backed warranties or guarantees.
The company designs, manufactures, glazes, paints and installs custom-made traditional timber box sash windows for new-build projects, period properties, and Grade II listed buildings. Its double-glazed units are now being recommended to restorers of Grade II listed buildings by conservation officers. This puts the company in a unique position to exploit and potentially dominate supply to the timber window market which is worth c.£450 million in the UK. (there are c.500,000 listed buildings in England). This is an exceptional company looking for an exceptional buyer. Contact us for a no-obligation discussion about selling your business https://www.linkedin.com/in/ruperttrevelyan/ Email: Rupert Trevelyan firstname.lastname@example.org Call +44 7826 050690
This week I have been doing valuations and talking to buyers about the asking price of some my client’s companies. I even dreamt about doing valuations, no doubt you will say that I need to get a life, but there are some triggers many of which I am familiar with.
There are buyers out there who are really keen on acquiring companies and I had 2 very long zoom calls yesterday examining the cost base of my clients and the valuation we have applied. I always tell my clients that it is essential that they continue to profitably grow their company if they want to achieve a good price, they also need to ensure that there is a strong transferable management structure in place, strong recurring revenue, shareholder agreement on the sale, an understanding of debt and how it will be treated, at the lower end many buyers prefer the target to debt and cash free.
The first caller was concerned that the profitability of the company he is looking to acquire is falling while revenue is increasing, this means the value of the company is falling, but the seller won’t accept that. Ultimately the buyer is likely to walk away, unless there is some form of price adjustment; he is willing to offer a deferred payment if things improve, but that comes with obvious risks for the seller.
The second caller was trying to get an understanding the revenue and cost implications of replace the owners of his target. The owners are a couple, they do have a team in place, but one of them is operational and works on one key sector generating a specific revenue stream, his partner runs the administration team. The buyer is astute and is working out the implications for him if he takes the business over. He is planning to make an offer but it will take into account the cost of replacing the owners.
Buyers are out there and are keen. They have added pressure that the providers of acquisition finance are still very vigilant, one buyer I am talking to spent 8 months putting together a finance package to make an acquisition, he was a week away from concluding the deal when our former prime minister and her chancellor decided to launch a budget that spooked the global market. The resultant market conditions mean buyers have to jump more and more difficult hurdles to secure acquisition finance
When you sell your business it would be wonderful if the buyer could pay you with one single payment on the day of transfer! The reality is that scenario is rare and most acquisitions are paid for in installments. There are reasons for this, firstly the buyer will be looking to minimise their risk (as you will as the seller) and in most cases they may not have sufficient cash to make the purchase, which means they need to raise finance which can come in a number of forms.
Funding At the level of sale we operate at buyers tend to fund their acquisitions by a combination of debt and assets : Debt / borrowing sources • Loans from sources that include banks, finance providers, peer to peer, crowdfunding and even seller loans Asset / cash investment • Cash from the buyer, investors including angel investors and venture capitalists, asset swaps
Installments The bigger the price tag the more likely that you will be paid in installments over a period of time . Typically you will be paid between 50 and 60% in the first installment, although we have seen 75%. The remaining payments are made at agreed intervals in the sale and purchase agreement, sometimes these can be 6 monthly or yearly intervals. There can be qualifying criteria for these payments, we resist performance criteria because we believe the seller is no longer able to influence these, however every deal is different and there may be some justification, but this is all subject to negotiation Typically the longer the purchase period the higher the agreed price and vice versa. Money the bank is tangible rather than the promise of a potential big pay day, so we favour larger first installments and a shorter completion period.
If you want to know more contact us on email@example.com or 07826 050690
Insights from our interactions this month 2022 has been a difficult year for business owners, we have come out of a global pandemic (or have we?), the war in Ukraine has hit energy and food supply chains and prices hard and then add to that the domestic political turmoil and the uncertainty that has created. Despite all that the general mood is surprisingly upbeat amongst all the business owners I meet and there are still buyers seeking businesses. So there is positivity out there, therefore owners looking to sell their businesses should continue to make preparations.
Tip of the month All businesses are facing strong inflationary pressures, which lead to rising costs, which in turn can drive down profit. Profit is one of the key drivers of value when selling your business, so if you want to sell keep a strong eye on profit levels and to look to at minimum maintain current levels or grow them if you can.
Some of the steps you can take to make your journey to selling your business smoother: – Plan well ahead, make sure your business is fit to sell * Is profitable with good cash-flow * Demonstrates growth and has a good level of recurring sales * Has a strong management structure and workforce * All contracts and legal paperwork are up to date * All accounts and documentation are up to date – Ensure all shareholders are in agreement that they want to sell – Choose good advisors (commercial lawyer, accountant, and broker)and ensure your focus remains on the business – Make sure you have a strong personal support network around you to help you de-stress and maintain your sense of humour. Featured Business this month WHOLESALER IN THE WATER TREATMENT SECTOR for sale Supplier of parts and components to the water treatment industry; both installers and dealers. Long established the company has built up an excellent reputation and operates from its own premises but is relocatable. Its product range is both bespoke and industry standard. The company has a turnover of £1.5m and generates an EBITDA of £478k. To maintain confidentiality we never disclose business names until applicants have signed a non-disclosure agreement.
I am lucky enough to work with #businessowners across a number of sectors, they are all amazing #entrepeneurs. I do find I get an extra buzz when I work with #manufacturers . There is something about companies making real products that really suggests added value. I recently posted about a distillery I am working with, I am now working with a #windowmanufacturer making products here in England with raw materials sourced in the UK too.
If you want to buy a manufacturer based in this country or want sell one why not contact me and start the ball rolling.
It can be stressful selling your business; letting go and ceding control to a new owner can be an emotional experience. During the sale process, things can be intense with you and your team having to answer difficult questions and provide lots of information.
On more than one occasion in the last few weeks, I have had to take the heat out of the situation to ensure a smooth handover. So, how do you prepare, firstly accept that it could well be emotional selling your business and try not to take things buyers and their representatives personally; they are just doing their job, and buying your business could represent a significant risk for them and the pressure to make the right acquisition could be very stressful to them.
Recently I started keeping bees and having bees buzzing around my face when I am inspecting the hive could be a bit daunting, but I wear a beekeeper’s suit and am very careful not to harm any bees, so what could be stressful, is actually very rewarding because I prepare appropriately. The same could be true for selling your business. I am just advocating that those who embark on the journey do so with their eyes open and prepare for your sale and a journey that may be a bit of an emotional rollercoaster.
Some of the steps you can take to make your journey to selling your business smoother: – Plan well ahead, make sure your business is fit to sell * Is profitable with good cashflow * Demonstrates growth and has a good level of recurring sales * Has a strong management structure and workforce * All contracts and legal paperwork are up to date * All accounts and documentation are up to date – Ensure all shareholders are in agreement that they want to sell – Choose good advisors (commercial lawyer, accountant, and broker)and ensure your focus remains on the business – Make sure you have a strong personal support network around you to help you de-stress and maintain your sense of humour.
On more than one occasion I have written about making a plan to get your business into a fit state to sell. Having a well-run growing cash generative company with a strong recurring revenue and management team in place puts owners in a good position to sell.
Not all owners have a plan in place for themselves once they have vacated the hot seat in their former business. Busy entrepreneurs tend not to be good at being idle for too long and no matter how appealing lying on a sun-kissed beach seems in the build-up to the sale, they soon get bored applying the suntan lotion. I have had clients who want to go and visit family members across the globe, others who want to tinker with classic cars, and others who want to start another business after they sell. I have also seen owners sell up and move to a dream location only to return after a couple of years and start again.
It pays to start preparing your personal path ahead of finding yourself drinking sundowners in a far-flung beach paradise twiddling your thumbs. It may be beneficial to start developing interests and activities that you can continue when you are no longer at the helm. For some the lure of improving their golf handicap may be the dream, for others, it could be taking on non-exec director roles and helping other entrepreneurs drive their performance. As a farmer’s son I have begun to nurture my garden (in a vain hope that I have inherited my father’s green fingers), most recently I have created a vegetable patch and apiary, it certainly gives me pleasure, whether it yields bountiful harvests is yet to be determined; I know it won’t keep me fully occupied once I eventually decide to hang up my coat, but I do believe it will be something I can draw continuity from, in what will be a period of transition in my life.
When the world around us feels grim, we have to start by wishing the people of the Ukraine our heartfelt support; then we could all do with some positive reinforcement, which was what I got in the form of a testimonial from a recent client.
Rupert was amazing; he fully supported us through out the entire process, whilst selling our business. He attended all the meetings with the potential buyers and provided invaluable advice to us, as novices in this area.
Needless to say the last 20 months have been tough on us all and the arrival of the Omicron variant is set to keep us guessing what the future holds. Many businesses are now finding ways to keep things moving and are trading at pre-pandemic levels and in some cases even better, thishas lead to positive movement in acquisitions market; only this week we have sealed the transfer of an alarm installer to a trade buyer. So, as we move towards 2022 it is prudent to consider whether now is the time sell your business. Questions to ask yourself: 1. Is your business demonstrating profitable growth? 2. Do you have demonstratable recurring income? 3. Have you got a strong management team in place? 4. Are you looking for a new challenge or lifestyle? If you want to discuss your answers to these and other relevant questions talk to an expert who can help you make a decision whether to sell or not. At Weybrook we are happy to have no obligation discussions and to give advice that can help you make a decision. To discuss the sale of your business contact Rupert Trevelyan email firstname.lastname@example.org call 07826 050690
As we start to unlock from lockdown, is it time for you to start thinking about selling your business? We have had really tough year with the Covid Pandemic, one thing it has reminded us is that life is for living and that we should savour every moment with friends and family. Entrepreneurs and business owners often are often working up to 7 days a week and they may well be considering lifestyle adjustments which could include selling their businesses. After the year we have had it may or may not be a good time to sell; at Weybrook we can work with you to put your business in the best position to sell; so why not give us a call to discuss whether now is the time to sell?
Listed below is some of the information buyers need from sellers:
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 upfront, 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: Revenue and volume o By product / service type o Key customers o Forecasts for the next year and the remainder of this year o Sales o Contract details o Length of tenure • 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 Management structure o Job roles and descriptions o Organisation chart 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!