23/11/2010

By Brian Livingston, Head of Mergers & Acquisitions at Smith & Williamson

Selling your business will be one of the most demanding and important events in your business life, involving a lot of emotion and, often, a lot of money. Be prepared to find the business that you’ve built and nurtured being crawled over by people trying to pick holes in it. But whatever exit route you choose — trade buyer, private equity, MBO — it’s as true today as it’s ever been that the key to any successful transaction is understanding your potential buyer. The goal you must set yourself is to get inside the mind of the buyer and send out the right messages about your business.

Remember that any serious buyer in the current market will be looking for reasons not to buy — the economy, the price, the overall uncertainty. So make sure you understand who you’re selling to and how to treat them. Potential buyers need to believe they are not your only option and therefore that what you’re giving up is a good opportunity for them.

The high-powered executives in the large company you’re likely to be selling to will find it hard to understand why you justify getting, say, £10m. They may not like it, so give them something to believe in. This could be along the lines of “I’m a small entrepreneur, I got lucky, this is too much for me, it’s too difficult”. The last thing you should do is tell them how brilliant you are and how bad they are.

Provide a compelling explanation about why your business works and why others may not, so get to know your competitors. Set it all out in a concise executive summary, which your buyer will probably much rather use and pass around than write themselves. Be upfront about the things that keep you awake at night. That way the buyer can buy with knowledge. Use your non-executive directors (if you have them) as your company’s conscience and be able to answer their questions before they ask them.

Looking at things from the buyer’s perspective will help you to stay in control of the sale process and maximise your exit value. The moment you lose control you’ll start destroying value. For example, stick to your deadlines and think carefully before chasing up a buyer — how can you do this without looking desperate?

If you're considering the sale of your business now or in the foreseeable future, don't leave your successful exit to chance. To discuss your particular circumstances, contact Brian Livingston on 020 7131 4914 or email brian.livingston@smith.williamson.co.uk

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Watch a video of Guy Rigby, Head of Entrepreneurs at Smith & Williamson, giving advice on how to manage cash flow.

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