About the webinar
You’ve worked hard to build a company, hire talent, create compelling products and services, and win market share. However, many entrepreneurs miss the opportunity to maximise the value of their business when they decide to sell. Learn the strategies for planning ahead, what good looks like, what buyers want, and how to achieve a successful exit.
- Focus your leadership team on what drives value
- What trade and private buyers are looking for in acquisitions
- Pros and cons of different deal structures
- Criteria for a strong, rolling three-year plan
- Get your (data room) house in order: legal, financial and commercial preparation
Key takeaways
A strong leadership team is essential to enable you to scale and also keep the business running during a sale process
Key person risk and a business which is overly reliant on its founders/owners to grow and operate is something buyers will see as a warning sign. A sale process will take a lot of the CEO’s time (and the CFO’s, if there is one). It’s essential to have a strong leadership team in place that can be relied on to deliver the business goals. A red flag for buyers is if the business starts to miss its numbers during a sales process precisely because it is too dependent on the CEO or owner-founder.
Think about who is doing the deal and who is keeping the business running. A business must be able to operate and deliver on its numbers without the CEO or founder taking the lead.
Buyers will look for - and find - red flags
Much like founder-dependency is a red flag for buyers, there are some others that buyers will look for during the sales process, for example:
- Poor retention - of audience and numbers. If there’s a lack of growth and volume isn’t increasing in line with revenues then buyers may be cautious
- Lack of a strong USP and a competitive market. The founder must truly understand the market they sit within, the competitive landscape, and their company’s position within that market
- Lack of rigour around financial reporting and KPIs. When buyers dig into the data, they will unpick the trends to see the true picture.
One of the biggest reasons our panel has seen deals fail is that businesses aren’t performing financially and aren’t hitting their numbers during a sale process. As a result, the expectations of value decrease, and people get nervous.
All too often, CEOs and founders will overlook some of the complexities of preparing for sale. The buyer will find the issues and red flags, so sellers should do the work, be open about it, and in an ideal scenario have uncovered potential risks well-ahead of going to market and are able to mitigate any issues.
Don’t underestimate the importance of a good buyer-seller relationship
You’ve spent years building your company and have made your business plan, built a strong team and prepared for the sale process. Finding the right buyer - the right partner - to back you, your team, and your company, and develop a relationship to help you deliver on your plans is paramount.
Buyers appreciate the opportunity to build a relationship, to have time to understand your business model and underlying market dynamics, and to socialise the potential investment with their boards and investment committees.
Choosing the right buyer, and in many ways a partner isn’t always straightforward. For sellers, you might be offered a greater multiple or more attractive deal structure, but if the buyer doesn’t share your vision, or there are cultural differences, you must consider overall fit for you, your business, and your team. It can cause friction before you’ve even begun.
Earn-outs aren’t all bad
Earn-outs are becoming more popular, but tend to have a bad reputation in terms of the ability to hit them. However, if you have the right partnership in place and win the trust of the leadership team, they can be beneficial to turbocharge the company’s growth plans.
An earn-out only works if it works for both parties. Everyone has to go into it confident about the structure and growth of the business, and stand behind the numbers.
Earn-outs are also situation dependent. If the plan is to grow an existing business then they can help to get everyone on the same page, but this can become challenging if you’re trying to unpick or merge it, and then need to unpick the numbers. If the plan is to change a business entirely then an earn-out may not be as appropriate and a share-based structure may be considered. Whatever the decision, ensure the rules of engagement are on the table and agreed on early in the process, and be honest with buyers on what you want.
Don’t rush integration
There are a multitude of ways in which to approach integration once a sale is completed. In terms of back office aspects, buyers might have a detailed checklist of items to support the integration and oftentimes the acquisition lead will also support the integration process, but this can differ from one acquisition to the next. On front office aspects (product and revenue synergies), it’s important to work with the buyer ahead of time, and ideally pre completion. Joined businesses planning is a great way to ensure you are aligned and set up to succeed from the outset. This is one of, if not the most important business decision you will make, so take proper time and space to ensure it is a partnership that will succeed for all stakeholders.
