The Process of Selling your Buisness

Assynt Corporate Finance

Limited

Andrew Watkin FCA20th January 2015

[email protected]

www.assyntcf.co.uk

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Briefings

• 7 top tips for writing effective Business Plans

• Cash is King

• Earn Outs

• How is cash created and absorbed in a business

• The Mysteries of Margins

• What is the right level of debt

• Why should I have a Financial Health check?

• UK Small businesses are failing to invoice for billions

• Handing on to the next generation

• Family Values – The options for “selling” your business

• What makes a successful MBO/MBI

• Launch of Crowdfunding App

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So what is corporate

finance?

It is not …

Neither is it…

In a nut shell, it’s about trust…

and money

You cannot do much in a business without money and to be blunt the more of it you have, the

more you can do and that’s where corporate finance can help with the transactions in the life of a

business…

So what are the types of

transaction…

Selling or disposing of businesses

• You want to maximise the value you receive at the time you decide to sell

Buying businesses

• You want to know what you are buying

Raising Finance

• You want it to be quick, simple and cost effective

Which route will you take to sell or

dispose of your businessP

ass

on

to f

am

ily

me

mb

ers • Identify appropriate

roles

• Train for handover

• Consider deal structure

• Tax planningS

ell

fo

r a

ca

pit

al

sum • Identify possible

purchasers

• Management team

• Trade Buyer

• Establish likely interest in the market

• Groom the business to attract highest value and most interest

Win

d t

he

bu

sin

ess

up • Establish likely costs

Selling businesses Stage 1

• Look at the areas to make the business sellable

• Shareholdings

• Tax issues

• Contracts

• Do you have something to sell?

• Timing

• When you go

• Missing the buyers window

• Likely buyers

• Research the market

Plan your exit

Selling your business Stage 2

• Summary of your business

• Prepare a flyer

• Research UK and Overseas Market

• Mailshot the flyer

• Advertise on certain business for sale web sites

• Advertise on networks

Market Research


• Information Pack

• Distribution of the Pack to potential purchasers under NDA/Confidentiality Agreement

• Indicative offers invited

• Offers collated and report back

Compile a list of potential

purchasers


• Meetings with interested parties

• Negotiate to Heads of Agreement

Proceed to meetings & negotiation

Due diligence you have to be ready again, again and again…

Completion… documents, documents, documents…

Some numbers*

• Average multiple being offered

– 4.1 times excluding earn out (UK and Ireland)

• Younger owners are more likely to receive an offer

– 39 or younger 16.15% receive an offer

– 60 or older 11.45 %

– Overall 11.75%

• But the multiple is lower for younger owners

– 39 or younger 3.37 times

– 60 or older 3.66 times

– Overall 3.66 times

• Most popular

– Estate Agencies, Rental leasing 18.8%

– Accommodation and Food 16.32%

– Transport and Warehousing 15.05%

– Average 11.76%

– Worst: Construction, 8.2% Wholesale 8.56% and Utilities 9.09%

• Industry average multiples

– Estate Agencies, Rental leasing 4.06 times

– Accommodation and Food 2.10 times

– Transport and Warehousing 3.63 times

– Average 3.66 times that’s across the network

– Worst :Construction 3.33 times, Wholesale 3.88 times and Utilities 5.00 times

* based upon research published by Sellablity Tracker Q2 2014

Best and worst businesses – the

effect on valuation• Say, the best businesses: 5.0 times and the worst: 3.00 times

• So, if your (adjusted)profits are £100,000 the difference is

£200,000 in the price

• The point is timing – If you believe you’d get 3.00 now do you

risk leaving it and hoping to improve the business by making

an investment in products or services, CRM systems,

marketing, social media, training and so on so as to achieve a

higher multiple or take the lower multiple now…

• It’s your choice but I will do the best for you when you

decide…

So why work with me?

• Experience in selling and buying businesses that are not necessarily well

prepared

• Focus on the whole deal – it’s not just the price!

• Help you to make the offering as appealing as possible to potential

purchasers

• I care about the outcome but I am not conflicted by the need for it to

complete

• I can focus on one deal at a time

So, let me do the negotiations?

Why?

• Protect the principals

– Keep your integrity so as to avoid being backed

into a corner

• Argue the point on your behalf

– Without putting your views in the firing line

• Protect antagonism

– Avoid souring relations between principals

But – it’s about a matter of trust

and how to build that trust

Contact details

Website: www.assyntcf.co.uk

Email: [email protected]

Mobile: 07860 898452

Office Telephone: 01438 750555/ 01438 730981