KPMG partner Tony McNaught, partner-in-charge of KPMG's Financial Advisory Services (FAS) team which is involved in the sale of a large number of businesses including many small firms with turnovers ranging from $5m to $20m.
How do you go about readying your business for sale?
Taking a leaf out of the Boy Scouts handbook, business owners should "be prepared". You should run your business assuming a buyer could approach them at any time. By taking this approach, owners tend to focus on what will add value to their business. On a more sombre note, I have also been involved in a number of unplanned business sales, driven by events outside the owners control like Illness and divorce.
For an owner who has a planned exit date, and has not taken the "be prepared" approach, they should begin planning at least two years prior. In our experience, steps are required to both make the businesses saleable and ensure the owner maximises the value of the asset they have often spent many years building.
How can you prepare your company so it's attractive to buyers? Put simply, see above and, make yourself dispensable.
Those "attractive-to-buyers" owners who build a capable team of people around them not only make their business more saleable, they increase the sale options available. Since 2000, we have sold a dozen businesses to management teams in Management Buyouts (MBOs) which represented a great outcome for both owner and management team.
The owner avoids having to market their business and has an opportunity to pass the business to the team who helped build it. The management team are always best placed to evaluate the risks of the business because they have been managing them. With careful planning and guidance, management can attract funding from the banks and private equity investors if they have a good track record.
The timing of selling your company is market, funding and/or company specific and it can happen at any stage in its life cycle.
So don't feel that you have failed if your business hasn't been snapped up in the first few years. Be heartened by the fact that there are a good number of active buyers in the small business market at the moment from private equity investors to large corporates looking for "bolt on acquisitions".
And there is no need to feel this means the end of your involvement with your brainchild. It is usual for the buyer to want the owner to stay on in some form. The involvement required is often correlated with the type of business.
A high-growth early stage business is likely to require more structured "employee like" on-going involvement. Compare that to an established business with a strong management team where the owner may simply be kept on in a board role, as was the case with Trilogy co-founder Sarah Gibbs, following the sale of the business to Ecoya.