27 Sep Getting the right advice when it comes to selling your business
Simon Cowie, founder and managing director of Infinity Partnership
Economic downturns, fiscal uncertainties, cost-cutting, strategic re-assessments, investment reviews. No matter how prevalent these terms have become in recent times, the wheels of business keep on turning.
While some supply chain companies feel the pressure as large players review costs in these changing times, opportunities will emerge for others. In a fluid business landscape, many companies will now see the chance to pursue deals and contracts they once thought were out of reach.
Likewise, opportunity will continue to knock in the mergers and acquisitions market. The question is, when is it right to answer that knock? And when should you keep the door firmly closed on a prospective deal?
Testing economic times will undoubtedly see companies sell off divisions to ensure the sustainability of the wider enterprise, while robust players will feel it’s actually the right time to move forward and acquire.
More than that, we can certainly expect to witness mergers in the year ahead as companies look to strengthen their position in the market or broaden their service portfolio.
However, the key to successful outcomes will be … timing.
Recently we advised a client against accepting an acquisition offer. We did so for several reasons, but primarily recommended saying ‘no’ because the deal was too much in favour of the acquirer. It might have been in our own commercial interests to advise the business to push ahead, but it simply wasn’t right for our client to proceed. While the deal is not off the table, further discussion is required further down the line to secure the right terms for our client.
To cite another example, we completed our fifth transaction in as many years for another long-standing client. It’s a process that involved reaching a series of agreements at meetings in the UK, Italy and the Middle East. It was another good fit for our client and there are exciting times ahead for this business, despite the challenging market in which it operates.
These are business critical decisions for any company; ones that in due course shape a sustainable, successful future – or consign it to failure. Choosing the right advisor ‘to get the deal over the line’ – or to ‘opt out’ – is imperative.
Here are five key points to weigh up before deciding on your business advisor:
Track record: Consistency of delivery is key. Which mergers and acquisitions has your business advisor supported? We’ve completed more than 50 deals worth more than £200m since 2011, and every one is different. Check that your advisor has a strong record of deal completion, and – perhaps more tellingly – find out why they’ve walked away from deals.
References are important – particularly testimonials from past transactions. They’re even better if they’re related to transactions completed a year or more ago; if the client still believes the advisor was good a year after completion, that’s a great sign.
Right chemistry: The chances are you’re going to be spending a lot of time with your advisor: you want to be communicating freely and working as a team. It’s not an over-simplification to say if you don’t get along, you may not get it done.
Value, value, value: Is your advisor able to define and maximise your company’s value proposition? Your advisor should be able to reach out to the market, if required, to cover all bases and find the right way forward. For many people, selling their business is a once-in-a-lifetime process. So it’s not the time to try something new or give an ‘up-and-coming’ company a shot at such transactions.
Transparency: Transparency on fees is critical – understanding what the costs will be and getting regular updates should be the norm. There are many factors to consider, not least terms and condition for payment to your advisor. There are advisors who take payment up front, and then a success fee only upon completion of the transaction. Are they working on the best result for you if they’re only focused on completing a deal? Remember, there are times when the answer is to walk away. I believe a more phased and structured arrangement – one that’s aligned to client objectives – works best for all parties.
The right process: Clear, effective processes to get to the sale stage are vital. Good communication every step of the way will ensure all parties have a clear outline of what lies ahead as a deal takes shape. Your business advisor’s intelligence gathering and negotiating skills should come to the fore as that ‘end game’ approaches. The maxim ‘experience is everything’ is never so apt.
Simon Cowie was the 2014 Dealmaker of the Year at the Deals and Dealmakers Awards. He previously won the accolade in 2009. In 2016, Simon was named Practitioner of the Year at the British Accountancy Awards