The business sales process is a very delicate and somewhat emotional decision. For shareholders upon an exit journey, or for investors considering a new move, it is one of the most important, transactions that one could make. Along the way, there are typically several opinions relating to the best option, best practice or best experience based on history. For most, buying or selling a business is not a decision anchored to history; but more of a movement to open future opportunities.
Starling Corporate deal with transaction across most sectors and deal with an extensive range of global buyers, therefore, we have listed our most heard misconceptions about the M&A journey.
How much is my business actually worth, and will I get my asking price?
It is often presented that the value of a commodity is what someone is willing to pay for it; therefore placing a clear asking price will produce clear and consistent offers. This is absolutely not the case for selling a business for maximum value. Unlike valuing a house based on comparable sales or sizes, each business is completely unique and should be treated that way.
To value a business at a set figure places a ceiling on any potential offer above this. It creates a negative negotiating environment, it ultimately creates a passive environment that can potentially allow for a very low transaction, and the most expensive mistake a shareholder can ever wish to make.
Starling Corporate introduce competitive environment. Typically, a business that we handle the sale of will return, 60 signed Non-Disclosure Agreements, 27 interested and qualified parties, 9 indicative offers. This lead to an average deal value that was 3 times greater than the first offer made.
This proves that by a targeted and proactive approach, there really is no asking price, or ceiling for selling a business.
I am the business, and who would buy me?
Business is only as strong as the people within them. Every business has a story, a journey and an idea for where it wants to go in the future. This is consistent to us as humans; ambition is what makes the world innovate. We understand that starting a business requires huge passion, dedication and sacrifice. In most cases, this is just the beginning and the level of personal investment from a shareholder into their business is hard to quantify.
We embrace this and see it as a huge selling point for future growth. Whilst this option does not relate to every scenario, Deferred Payments based on performance, timings or incentives can allow for the largest possible sale value where the exiting shareholder is in place post sale to allow for future prosperity.
With low interest rates contributing to high liquidity there has never been a better opportunity to focus on the next chapter.
LINK “Contact us for a no obligation discussion around the sale of your business” LINK
Selling a business is dependent on accounts?
Accounts and financial figures tell us a lot about the business. We are often asked about return of investment, future earnings and growth potential within a potential opportunity. These cannot be found within historic accounts. Whilst accounts are essential to analysing and portraying a company’s history to a buyer, it is important to create a vision for where the company can be in the hands of new, often fresh and greater resources.
Therefore selling a business is an accountancy exercise… to an extent. At Starling Corporate, we take a business and forecast where its accounts could be in the future. We take this information to a competitive environment and establish how our client would benefit from buying the future benefit of a business. This is how we are able to create ascendancy with our offers rather than limitations.
Selling a business for its true and maximum value is equally a Sales and Marketing exercise as it is an Accountancy process.
I can sell my business myself?
This is not something that we disagree with. No one knows a business better than its owner. However, this does not always relate to their ability to negotiate the best price by exploring every possible buyer avenue within, or outside an industry. A good adviser knows the market, can manage the emotions of both buyer and seller, and negotiates the deal. The way an advisor can reject an offer is essential to the process and often leads to a greater range of offers being tabled.
A recent example of ours was a catering client who had listed their business on a DIY website with an asking price of £349,950. After being disappointed with time wasters and low ball offers, Starling Commercial were able to negotiate a deal with an overseas trade buyer for a seven figure deal.
The overall sale value from Starling Corporate was 7 times greater than the first offer.
About the Author:
Jay Ellen – Senior Researcher
Jay has been working in M&A for 8 years and has an extensive contact list within Private Equity and Buy Side Corporate Finance advisors. Ms Ellen is able corroborate proven success with deals specifically in Professional Services, Oil and Gas, Property and Logistics.
If you are considering selling your business, contact Jay or Starling Commercial today to discuss your market, and your opportunity