It’s unlikely you would sell your home to a chance buyer who knocked at your door, or put it on the market with the first estate agent that happened to cold call you. Selling your company is a similar story when you consider the approaches you might receive from interested buyers or agents.
Like your house, your company is a valuable asset, one in which you have invested both financially and emotionally. So when you come to sell your business, you want to ensure that you have the best opportunity to achieve the best value for all that hard work. You may also want to ensure that your business is protected and your loyal staff are able to continue to develop under your new owner. You are unlikely to achieve your desired outcomes if you sell your company to the first offer or cold call that comes along.
Finding a buyer is the third stage in Devant’s seven step guide to a successful company sale. As we explained in our guide, you might find that you receive an offer to buy your company out of the blue, or you might have decided that it is time to sell and be looking around for help on how to go about it. Hopefully, you will have started to prepare and completed pre due diligence work to put your business in a strong position to achieve the best price and to appeal to buyers.
Who is your ideal buyer?
Your business is only worth what a buyer is willing to pay, so you need to find the right buyer, in fact your ideal buyer, in order to realise the value you have created. So, who is your ideal buyer? You might already have a good idea about this, but you should consider the saleability of the business to different buyers:
- Would it fetch a better price if sold to a trade competitor who wants your client base, or wants to expand into your area?
- Would the best fit be found with someone above or below you in the supply chain, or with someone who can make the most of your valuable intellectual property?
- Maybe your business would appeal most to a company where there are some synergies and whose portfolio would be dramatically improved by a company like yours?
It’s not all about the money
The funds you can achieve from the sale will probably be the deciding factor for you, but you may also want to take into account other important factors, such as:
- Do you want to sell to a buyer who is going to continue to develop your business and provide opportunities for your company and your team to grow and improve?
- Will you stay in the company working with the new owners for a period of time to achieve an earn-out? Then your ideal buyer will need to be someone you like and trust and can see yourself working for in the first year or two after the sale has gone through.
- Would you mind if your buyer was an investment company with a history of breaking up businesses and selling off the assets?
- Have you considered selling on a management buyout basis, which might give the best opportunity for your team to be successful?
Many of Devant’s clients have successfully gone on to achieve their earn-outs because they chose the right buyer who not only provided the best price but the best match – they were ‘the one’! Other business owners have struggled with no longer being in full control and the new owners have made it very difficult for them to continue to work in the business. Along with the money, it’s also important to consider values and management culture.
How do you find your ideal buyer?
A corporate financier can be your match maker when it comes to finding your ideal buyer. Among other services, they will be able to:
- Value your business.
- Assess the market and advise on the right approach and the right time to sell.
- Identify different potential buyers.
- Prepare a sales document (Information Memorandum) to attract and impress the right buyer.
- Help you engage in negotiations if there are multiple potential buyers, while together you figure out which of the potential buyers is likely to be the best fit for you, culturally and commercially.
- Support you in high level negotiations if there are multiple potential buyers, while together you figure out which of the potential buyers is likely to be the best fit for you, culturally and commercially.
This is where the offer terms and price will come in, and your corporate financier will have the expertise and skills to support you through this vital early stage. One of Devant’s partners, fds, has particular skills in coming up with creative solutions that you might not have considered, to help secure initial offers for you.
Other Devant partners, such as Elephant’s Child and Action Coach, support clients in growing their business and by their very nature have many contacts and businesses who are seeking opportunities for new acquisitions as part of their growth plans.
You can also make a start yourself – investigate with your trusted business contacts, or perhaps other acquaintances or senior employees who have expressed an interest in investing in the company or getting more involved in the business operations. You could also consider advertising in the various business forums and publications geared towards small business owners in your market. While this may generate some interest, we would recommend that you involve professional advisors at the appropriate time to support you through the sale process and protect your potential business sale value.
Once some offers have been secured, you may want to choose a single buyer to negotiate with, or, on your corporate financier’s advice, you may choose to proceed on a non-exclusive basis with two or more, to help you work towards the right deal at the best price.
Where does Devant come in?
While Devant is not a corporate financier and does not actively seek out buyers for you, we do have various experienced and successful corporate financier partners, tax advisors and other contacts who will be able to help you find your ideal buyer and your best deal.
We provide high level commercial support through this ‘finding a buyer’ stage of your company sale process. To help you focus on your objectives. Devant consultants will look at the high level terms and structure of the deals you are being offered and work in conjunction with your corporate financier and other advisors to get the right deal for you. We act as an additional sounding board for our clients when they need to discuss and consider their thoughts on different buyers and approaches. We are there at the end of the phone, walking through the process with you.
Devant will draft or review a non-disclosure agreement (NDA) for you to put in place with potential buyers. NDAs are particularly important at this stage in helping to keep your plans secret and protect your confidential information from any unscrupulous players in the market. We can also begin work on setting out the key components of a deal, ready for drafting the Heads of Terms once agreement on the main terms is reached.
Planning ahead and making full use of advisors is key to finding ‘the one’! Involve us at this early stage to minimise errors or misunderstandings in the deal structure and avoid the need to revisit and renegotiate the deal later on, saving yourself valuable time and money.
With your ideal buyer found, you can move on to Step 4 of Devant’s guide, Agreeing the Heads of Terms.
Janine Scott
Senior Commercial Consultant
