Written by James Bailey, Partner.

 

We’ve been covering the key areas to consider when preparing your business for sale. In my first blog on preparing for sale I covered understanding your objectives, starting the process early, company profile / brand and the trajectory of your business.

This second blog on preparing for sale will cover other key considerations:

1. Have the right management team in place

Reducing dependency on the owner or retiring management team will go to value as well as potentially shortening the required handover period post-sale.

If you are selling the business to private equity, there needs to be a clear plan and the right people to continue to run the business and deliver the strategy the PE house is buying into. If you don’t have a CEO in place, then you may be needed to run the business for a period whilst a successor is recruited.

2. Good housekeeping

You need to ensure in the run up to a business sale that you have all your ‘housekeeping’ in order. This can be in areas such as contracts being place for your staff, property, suppliers, customers and company financials.

You need to ensure you have the right quality and depth of financial information in the years running up to the sale. Implementing or improving the effectiveness of management accounting and KPI reporting will go to value as well as assisting in making the due diligence process smoother.

The demand for quality information is crucial in any sale transaction. Some sectors such as technology have detailed and sophisticated requirements around due diligence – having that data prepared and readily available is a great idea.

3. Get to know potential buyers

Understanding exactly who the future buyers of your business could be will undoubtedly help you better to prepare for the sale. You need to think like a buyer to understand why they may buy your business and what their objectives might be.  Any process will involve a more detailed review and it’s a fair bet you will not identify the ultimate buyer but the exercise will help in readying yourself.

As much as it’s good to identify your potential buyers and put yourself in their shoes, you don’t want to slavishly match your strategy to just one buyer. They may not become your eventual purchaser so, build a list of companies and CEOs that you think may be interested, and perhaps aim to ‘get on their radar’ in the years before an eventual sale.

4. Business structure and tax planning

Efficient tax planning in advance of a sale clearly makes sense. The earlier you put such planning in place the better.

Restructuring prior to sale might enable you to re-organise the ownership, operational, capital, tax and legal aspects of your company to align your structure to your long-term goals and personal wealth objectives.

Restructuring will take time, so early preparation is key. Restructuring can take many forms and will depend on what you wish to achieve, for example:

  • consolidating businesses into a group structure
  • share reorganisation
  • demerging surplus assets such as property

5. Seek professional advice early

It is never too early to seek the right professional advice. A professional advisor will be able to help you identify potential buyers, ensure there are no ticking time bombs in the business, help you to focus on the areas that will increase value and ensure the sale process goes smoothly.

Here at Springboard, we work with business owners and founders up to 2-3 years before the business is sold.  Our work in buying businesses and years of experience selling mean we know exactly what buyers will be looking for and we will advise you on all the options for sale, challenge your thinking and give you straightforward advice.

If you would like advice and help on preparing for sale, then contact us today.

Written by James Bailey, Partner.

To achieve a successful sale, maximise value and minimise the risk of a failed transaction, founders and shareholders should have a clear plan.  Below, I’ll cover some initial areas to consider and will follow up with more detailed considerations for sale preparation in a subsequent article.

1. Be clear on your objectives

Being really clear on your objectives is an important first step when preparing to sell your business. Consider whether your objectives are purely financial, personal, and the role that creating a legacy plays in your decision.   Maximising value is a simple goal but how important is who the acquirer is and their likely approach to your ‘baby’ when they have the keys?

Having a set of realistic goals will increase the likelihood of achieving your objectives. Clear objectives should also allow you to keep sight of the reasons for selling your business and increase the likelihood of a successful outcome.

2. Start early

My key piece of advice is that it is never too early to start preparing for sale. There will be areas you need to work on in your business and the earlier you identify these, the better. If you leave making significant changes until just prior to sale, a prospective buyer may well see these as cosmetic and purely for sale purposes.

This is your one opportunity to crystallise the value that you have created over many years. You simply cannot start too early in readying for sale.

3. Consider your business profile and brand

Consider how your business looks to the external market and its reputation. How your ‘brand’ is perceived will have a significant impact on who may purchase your company and value they place on it.

Branding/profile is about creating a reputation, credibility, longevity and market positioning for your company. It encompasses everything you do and say as a business. It can be a simple as your website – which is very likely to be the first port of call for many potential suitors through to your attendance at trade shows and the profile you generate through industry awards. Whilst all of these might feel quite tactical, they all add to your credibility and visibility.

4. Think about the trajectory of your business

Your business trajectory (both financially and commercially) can be one of the most valuable (or destructive) factors available to you when you decide to sell.

Buyers will be not only looking at your business today, but its future prospects. When growing and scaling your business, one of the most important decisions you make is about the path you’re taking to get where you want to be. Your business trajectory starts with a clear goal, then defines the most direct path to achieve that goal.

The trajectory of your business can be evidenced in a variety of ways whether it is customer acquisition rates or increases in profit or revenue. You need to show potential buyers’ momentum and showcase a well thought-out and invested business. Buyers will have their own views on what they might do with your business but they will place a premium on a target that has its own clarity of vision and momentum.

Summary

One of the most significant challenges that business owners and shareholders face is laying the groundwork for a successful sale of the business. The challenge involves understanding what to work on to prepare your business for sale and when to work on those key areas. You will sell once and it’s impossible to overstate the importance of being ready.

Planning is key to the successful outcome of any sale process. Ineffective pre-sale planning will result in lost value for shareholders and worse still a failed sale process.

Selling your business is often a once-in-a-lifetime event and you need to get it right. A key component to effective preparation and a successful sale is allowing sufficient time to prepare and having the right advisors on board to support you.

Contact us today if you require help and advice on preparing your business for sale.

Written by Robert Johnson, Partner.

The decision to sell your business and who to sell it to can often be a tough one to make. You need to carefully consider all your options and reflect on several factors including:

  • Your personal and professional aspirations
  • Whether you’re seeking a ‘clean’ exit with no ongoing involvement
  • The time horizon which you are comfortable optimising your returns over

In this blog, I discuss three different types of buyers that you could sell your business to and highlight the strengths of each given the factors outlined above.

 

Strategic buyer trade sale

Strategic buyers normally look to acquire a business that can complement or support their current operations. They are typically bigger corporates based in the UK or overseas.

Strategic buyers are likely to be operating within the same or complementary industry as your business. They will know the sector and the opportunities within it and clearly understand the benefits of acquiring your business. These types of businesses are less likely to require you to continue to run the business long-term, giving you the option to exit the business quickly and have a ‘clean break’ from the business.

Their reason for an acquisition will be to access critical components of your business such as your customer base, manufacturing capabilities, your team, or your Intellectual Property. Fundamentally they will want to generate synergies – which are typically about cost savings or revenue growth.

Benefits of strategic buyers

  • These types of buyers are generally prepared to pay a higher multiple for a business – they will be including some element of the synergies highlighted above
  • Strategic buyers will often give you the ability to exit your business more quickly. This will be via handover period that might last between 3 and 12 months. There may be a financial incentive for you to complete this period successfully.
  • If you retain a stake in the business, perhaps with an option to sell it to the acquirer after a period, you could benefit from better returns as they are likely to improve the business through the synergies outlined above. You do of course need to remember that there will be only one buyer for your retained stake and therefore agreeing the right valuation mechanism on day one is crucial.

 

PE backed trade sale

A PE backed trade sale is similar to that of a strategic buyer, but the buyer will be backed by private equity funding. These types of acquirers will have a similar rationale to a strategic buyer and will be looking for synergies and growth opportunities.

PE backed acquirers are becoming much more prevalent in the market and we have completed a number of sales for clients being purchased by these types of companies as well as advising a number of serial acquirors.

Things to consider when selling to a buyer with PE backing are:

  • They may be looking for fast value creation from the acquisition.
  • They will be making other acquisitions or going through other transaction liquidity events in the future.

Benefits of a PE backed trade sale

  • PE backed trade buyers are proven acquirers, with well-defined processes to manage the deal. This means the deal can be quicker and easier to complete.
  • They bring with them credibility.
  • You may have the ability to retain shares and there will be good opportunity to realise further value as the acquirer will itself be going through a liquidity event in relatively short order.

 

Sale to a Private Equity Fund

If you’ve founded and grown your business and have the right leadership team in place to continue to run the business, then a sale to a private equity fund may be right for you. A private equity investor is not going to take over and run your business, so this type of deal is only really suitable if you have the right management team in place and a clearly defined growth plan.

It is often the case that a private equity fund will insist that you continue to be part of the leadership team of the business for up to 3-5 years and retain a stake. It may also be that your involvement reduces over that time and that you work with the Fund to recruit your long-term successor.

Benefits of a Private Equity Fund acquisition

  • You are more likely to be able to continue to retain some control and a stake in your business.
  • After realising some immediate value, allowing you to de-risk your exposure to what is likely to be your main asset, you will have the opportunity to realise more value on the subsequent deal or deals, for example, when an onward sale occurs in 3-5 years’ time.
  • A PE fund backer will provide funding for growth plans and future acquisitions, along with additional skills such as corporate discipline, strategic rigour, and a wider pool of knowledge around the board table, helping you to accelerate your growth plans.

 

Overview

The acquisition market remains buoyant, and we are seeing more ‘staged’ deals, where business founders retain a share in the business for a period of time. In the current climate, with uncertainty this type of partial deal can be more attractive for both the acquirer and the seller. It also provides more opportunity for you to benefit from an uplift in value following the deal or subsequent transactions.

Regardless of which type of deal is best suited to you, there is a sophistication needed to negotiate the right deal in all respects. It’s crucial that you get professional advice from a financial, commercial and legal perspective.

Springboard Corporate Finance can support you throughout the sales process and advise you on the best routes for you to consider. Contact us for help and advice on the best option for you to sell your business.

Written by James Bailey, Partner

Acquisitions continue to shape the growth strategies of many businesses and can be a central route to new markets, products, resources or simply to grow profitability and turnover faster.

Making a single acquisition can be a challenge in itself but how should a business go about completing a number of deals?

While there isn’t a guaranteed formula, we have supported several clients in their plans, working closely with them to manage the process and ensuring that the risk and disruption to day-to-day operations are minimised.

Here are our top tips for managing acquisitions.

Have a clear strategy (and try to stick to it)

The strategy should include all your business reasons for seeking an acquisition. You need a clear plan of your long-term goals and how any acquisition will underpin these.

Your M&A plan should include: the nature and scale of business you want to buy and the number of acquisitions you want to make.  Think about your biggest channels of growth and opportunity, as well as any gaps that an acquisition could fill.

Whilst you don’t have to stick to this plan rigidly, it is wise to set some criteria and boundaries for your M&A strategy. Be clear on how far you are willing to stretch your criteria if an opportunity arises.

If you are talking to external funders, you will need this clarity for them to have confidence in your ability to plan and manage acquisitions. This in turn will help to secure funding for your plans.

Create a dedicated team

You need to ensure you have capacity in terms of internal resource. This in-house resource in combination with the right external advisors is key to success.

The Internal team are likely to have day to day responsibilities as well, but you need to ensure those individuals have the time to focus on their M&A roles. The strength and skills of your internal team can often be a major contributor to success or failure.

Avoid large teams that might have fragmented/siloed views losing sight of the overall strategic objective. Build a tight and trusted team of internal stakeholders and compliment this with external advisors working together and communicating clearly to ensure the process runs smoothly.

Run a process but recognise the needs and worries of the seller.

As a buyer you will have a process to work through, however, you need to ensure that the process itself does not affect the outcome.

For example, if you are a larger organisation buying smaller owner managed businesses, the owners will have concerns for the future of their business post sale, including their staff, the brand, the business reputation etc. You need to put yourself in the mindset of the seller and avoid looking overly corporate in approach.

Keep your own process and details of any other deals you may be working on away from the seller.  To complete a deal, you need to ensure the seller feels that you are focused on their needs.  There is nothing worse than making them feel like you have other priorities.

Listen

While you need to have a clear process as the acquirer, don’t let this override the emotional connections and remember that the vendors will need assurances from you.

For the seller, the price will no doubt be a priority but there may be “softer” needs that they will be looking for alignment on before agreeing a deal.  Listen closely to the seller and then do your best to reflect on these as you execute the acquisition as this may well be the key to getting the deal across the line.

Create a pipeline of potential acquisitions and manage it!

Understand that not all acquisitions will run at the speed you expect and that some deals may take longer. You need to be willing to adjust the timeline to suit the seller and their needs.

If you are looking to acquire multiple targets, there is huge value in having a pipeline of potential deals and targets at various stages.  Over time you will likely have a pipeline that consists of deals at first contact, valuation analysis, negotiations, due diligence and near closure.

Be patient…….

As a buyer you won’t always be in control of the negotiation process or it’s timing. Often, we find that a seller may have unrealistic expectations of their business value, in this case if the business is growing, it may be a better for them to sell in 6 or 12 months when the business might have ‘grown into’ the price.

We can often be talking to potential targets for years before they decide to sell. So, buyers must be prepared for the long haul.

This is especially true if the deal is off market i.e., the founder was not considering selling and you’ve approached them. You will need patience to let the seller consider their options, think about the approach and what they want from any potential deal.

Reputation matters…

Listening to the needs of the seller, being patient, straightforward and respectful to the sellers of target businesses will ensure you create and maintain a good reputation in the market as an acquirer – this is incredibly important – a good reputation is hard won!

What our clients say…

“Acquisitions form a key part of our growth strategy.  Having the right team in place both within our business and externally has been critical to delivering.  We have developed a process that enables us to deal with all types and scale of opportunity – this is crucial to enabling us to win the trust of vendors and then execute deals in the most effective way for all parties.”                                                                           

Ed Hannan, CFO Jensten Group

Summary

As a buyer, you should not underestimate just how time-consuming and resource-intensive acquisitive growth can be.

To minimise risk and disruption, you will need to have a clear plan and capacity internally to manage the process without disrupting your day-to-day operations.

There is no single, overarching recipe for meeting M&A objectives as companies in different sectors have their own unique challenges. However, setting goals, being patient but focussed and having the right people in place, including experienced external advisors is critical.

If you require more help and information on buying a business, raising finance or managing an acquisition strategy, then please contact us.

 

Delighted to host 50 business leaders at Vinoteca for breakfast with guest speaker West Midlands Mayor Andy Steet.

Andy Street gave a positive talk covering the impact of the Commonwealth games including how it has changed perceptions of Birmingham and how the underspend can be reinvested into our community.

He outlined how the West Midlands economy bounced back post Covid and the plans to propel growth in the region.

Finally, he talked about devolution, giving the West Midlands more local powers and already unlocking £5billion investment in public infrastructure.

Has last week’s statement created a ‘Perfect Storm’ for business owners?

It’s safe to say that the last few years have been far from plain sailing for UK business owners. Dealing with Brexit and Covid have already had a huge impact and the Chancellors mini-budget, subsequent currency crisis and rising interest rates on the back of burgeoning inflation have created a ‘perfect storm’ for UK business owners.

They say things come in threes (both good and bad…), we can only hope that Brexit, Covid and the current volatility account for the three things that business owners have had to deal with.

Business owners needed measures that helped provide more stability and certainty for the future from the mini-budget. However, the announcements have done quite the opposite. With a currency crisis and the near certainty of rising interest rates, it feels like business owners are having to ride yet another wave of volatility, which could hinder them being able to make long term plans.

Some positives to take away

There are some positives to take from the announcements the Chancellor made. Some of the measures will provide some short-term relief for businesses. It’s good to see the government focused on growth and promoting investment through initiatives like the creation of ‘Investment Zones’ across the UK.

Announcements around increases in Seed Enterprise Investment Scheme (SEIS) limits and schemes such as SEIS, Enterprise Investment Scheme (EIS) and Venture Capital Trust (VCT) being extended beyond 2025, will also be welcome news for those looking for investment.

A clearer focus on capital allowances could achieve more

Between 1995 and 2015, Britain had the lowest levels of business investment of all OECD nations. One explanation for this has been that our tax system has not fully supported investment. The UK is also falling behind its European neighbours in terms of supporting capital investment.

Whilst I applaud the government for trying to support businesses and stimulate growth, there are more targeted ways to achieve that than the raft of measures announced by the Chancellor.

Rather than simply cutting Corporation Tax, I would have liked to have seen the Chancellor focus more on tax breaks for capital investment, such as extending capital reliefs to structures & buildings as well as plant & machinery. The Centre for Policy Studies published details prior to the announcements to show how reforming capital allowances would have a far more significant impact on investment than cutting Corporation Tax.

Overseas investment

With Sterling plunging to its lowest level against the US dollar since decimalisation in 1971, you could argue that this makes the UK more attractive to these overseas investors. However, whilst the cost of acquisition may be lower for overseas investors, when extracting profits from the UK back overseas, investors will see these profits devalued. The rising cost of imported raw materials because of the weak pound will also affect profits. We are truly part of a global economy nothing is that simple!

What affects will the announcements have?

Many experts predicted that Brexit and Covid would slow down the M&A market, but in many cases, we saw quite the opposite. Challenges breed resourcefulness and innovation and the UK business owner has consistently risen to that challenge. I think it’s too early to say how the announcements in the mini-budget will affect the M&A market overall.

Summary

One thing is clear it’s been an incredibly tough few years for business owners with so much uncertainty and volatility that major global events have had and I’m sure that some will be wondering whether to continue to run their business or sell.

What business owners needed was a focus on creating more stability and certainty and the mini-budget announcements have had exactly the opposite effect.

The UK government are right in trying to target business growth and whilst some of the measures offer some short-term relief, they haven’t gone far enough to fuel longer-term investment. More focus on areas such as capital allowances would encourage long-term investment and create a greater impact.

As with all major changes, there will be some opportunities. Whether you are looking at securing inward investment, selling your business or acquiring a business, if you plan, consider volatility, risk and fund appropriately, Friday’s announcements won’t stop many business owners making key decisions. Our business founders and entrepreneurs have consistently risen to the challenges of the last few years – I am sure they will do so again.

Springboard CF is delighted to have won ‘Deal Of The Year’ at Insider Media Midlands Dealmakers Awards 2022 last night for Sykes Holiday Cottages acquisition of Forest Holidays.

Sykes Holiday Cottages was advised on the deal by Springboard Partners Simon Ward and James Bailey, Director Matthew Guest, Assistant Director Tom Hammond and Executive Claudia Haywood. Simon commented “Sykes Holiday Cottages has been a client of Springboard for many years and it was an absolute pleasure to partner with the team there to deliver this key deal. The development of the Sykes business has been massively impressive and the Forest Holidays transaction is set to accelerate this still further. ”

Photo from left to right:
Chris Handy LDC, Springboard’s Tom Hammond, Simon Ward, Claudia Haywood, presented by George Apperly, vice president – global professional & financial risks, Lockton Transactional Risks

Springboard announces raft of promotions and recruitment

James Bailey and Robert Johnson are both promoted to Partner.  James joined Springboard in 2011 and has worked on a number of high profile transactions with a particular focus on the acquisition support work Springboard provides to a number of high profile private equity investees including Sykes Holiday Cottages and the Jensten Group.  Robert Johnson has been with Springboard for 15 years working on a range of transactions including the sale of Wonderlane and the sale of Claremont Ingredients.

In addition Matthew Guest and Jonathan Wright are both promoted to Director.  Tom Hammond is promoted to Assistant Director while Pauline So and Daniel McCartney are both promoted to Executive having recently gained their ACA qualifications.

Springboard is also pleased to announce the recruitment of James Cross as a Manager.  A KPMG trained accountant most recently James has worked for an independent advisory firm supporting across a range of transaction types.

Springboard Partner Simon Ward commented “I am absolutely delighted to announce these promotions across our team.  It is a real pleasure to welcome James and Rob to the partnership – both have contributed massively to the development of the firm.  Jonathan, Matthew and Tom have earned richly deserved promotions for the quality of work they do for our clients every day.  For Pauline and Daniel it has been great to see their careers develop. We welcome James Cross to the firm and are delighted he has chosen to join us.  We have seen high levels of activity across all areas of our business over recent months.  For founders there remains strong interest from acquirers both in the UK and overseas whilst our private equity clients remain keen to grow via acquisition and new investments. Our recent support to longstanding client Sykes Holiday Cottages on its acquisition of Forest Holidays represents another landmark deal for us. These promotions are a demonstration of our continued optimism about the future and our commitment to providing great client service across our business.”

 

 

 

Springboard Corporate Finance has recruited four new team members.

Among the recruits are Claudia Haywood and Saquib Hussain who join as executives, and will work on a variety of buy and sell-side assignments.

Haywood is a chartered accountant who previously worked in audit at EY, and Hussain, also a chartered accountant, is joining from the transaction services department at KPMG.

Shivan Vallabh and Hamza Rehman will also be joining as analysts who will assist the team across a variety of M&A and advisory projects.

Prior to joining, Rehman worked as a senior analyst within Deutsche Bank providing an in-depth risk analysis of clients across investment bank and Vallabh joined Springboard following audit placements at PwC.

Simon Ward, Springboard partner, said: “We have seen high levels of activity across all areas of our business over recent months. For founders there remains strong interest from acquirers both in the UK and overseas whilst our private equity clients remain keen to grow via acquisition and new investments.

“The recruitment of Claudia, Saquib, Shivan and Hamza is a demonstration of our continued optimism about the future and our commitment to providing great client service across our business. We are delighted to welcome them to the team.”