To sell at the top is perfect timing. The problem is that none of us can predict when we reach that key moment, that’s called getting lucky, but what are the factors to look out for to ensure we do ‘get lucky’?
The first thing to remember is that, generally, it does not ‘just happen’. Creating a successful sale requires action, momentum and the ‘going after’ of the right and relevant buyers. Creating the deal – is what getting the right adviser on board is all about. The right adviser will help create the right deal at the right time, with the right buyer at the right price.
Timing is everything. There are three key cycles to consider: the market, the company and your own business sector and, if you can align them all on the upward trajectory, then you should get an exceptional price for your business.
Whilst all the wider market dynamics may be strong, you must ensure that you also have strong trading dynamics within your company. Acquirers do not want to buy headaches. Earnings, growth and positive cash flow are essential – the stronger the growth the better the price. Remember it’s very difficult to sell a business which has reached a plateau or even worse is on the slide. It is also very difficult to sell a business which is in a sector which is in decline or is notoriously lumpy. The best time is always on the up.
As any good surfer will know good waves come in threes and if you can hit all three waves: the wave of growth in trading results; the wave of strong sector activity and the general wave of confidence rolling through the M&A market, then you can get an exceptional ride and may even get to buy the surf beach!
These factors generally do not prevail for long, so remember a ‘quick deal’, start to finish, can take six months. The market is good, prices are good, the buyers are international and UK technology companies are some of the world’s most sought after assets.
When Not to Sell – Potential Issue to Consider:
- Market, sector and company cycles not aligned
- Reliance on too few clients / employees / suppliers
- Significant contract renewal imminent
- Inadequate working capital
- Lumpy trading patterns
- Business ex growth
- No planning – management / processes / housekeeping
- Sub scale
- Contingent liabilities – legal, technical