Before your board can maximise the value of their business, it is important to know what the business is currently worth. By looking at recent deals in your market and speaking to a trusted adviser, you should be able to form a good valuation estimate. However, having a good valuation does not necessarily mean a business is immediately saleable. A saleability review should therefore be carried out to identify any areas, which could be addressed to make the business more saleable, for example; extending key client contract lengths and/or planning for management succession.
A buyer will often pay more for a business with credible growth opportunities. Articulating the growth potential of a business through emphasising new products, new markets and new clients is key. Each opportunity should be both proven and monetised to improve credibility. There are also some simple, quick and cost-effective measures a board can undertake to increase the value of their business. These can include updating the website and reviewing the previous three years of accounts to remove non-recurring items by way of example.
Once you have helped your board to identify the type of potential investor/buyer for their business, it is important to position the business attractively to them. Generally speaking, a financial investor will seek a strong management team who are capable of running the business without their direct day-to-day involvement. Trade investors, on the other hand, tend to take a more hands on approach. They will look to build cost and sale synergies between the two businesses. In cases where there is more than one investor/buyer interested in a business, competitive tension can build up. If managed correctly, this can help to maximise the eventual price at completion.
Timing is everything when it comes to a process, so much so that it can be the difference between success and failure. The right timing is driven by a range of internal and external considerations, not all of which are in the control of management. Factors outside of management’s control will include competitor strategies and general economic conditions. Factors that can be controlled include the positioning of a business, its financial performance and the retention of key employees. Strategic advice on timing is one area in which your appointed adviser will be able to really assist in helping to maximise value.