What considerations should families and private owners give to preparing their businesses for sale?

The past months of uncertainty and market volatility have prompted many of our clients to re-evaluate their financial priorities, which for some has meant asking if it’s the right time to sell a stake in or all of their private or family-owned business. In this webinar, Helen Watson chairs a panel discussion with Jeremy Furniss and Simon Cope-Thompson from Arrowpoint Advisory, and Claire Suddens-Spiers from Global Advisory’s equity advisory team, to discuss the key concerns and decisions private business owners should address when preparing to sell.

Until the recent re-tightening of Covid restrictions, market conditions had created a positive environment for owners contemplating a sale of their business. Mounting confidence, a need to deploy capital and sustained public company valuations have supported the attractive prices that often tempt potential vendors. Added to that, intensifying fears of the UK government increasing capital gains tax rates have motivated company owners to explore a liquidity event now despite the uncertain environment. While confidence may have taken a recent dip, Jeremy remains optimistic about the current market outlook for private owners and families considering a transaction.

Discussing the possible routes of sale, Simon differentiates between a trade sale, a private equity sale and an initial public offering (IPO), and the subsequent choice between a partial sale or selling outright. While a trade sale usually involves selling the whole company, Claire explains that IPOs are commonly partial sales and are often longer-term solutions for growth businesses, especially given the current level of liquidity in capital markets. This liquidity has also meant that there is a huge amount of capital across the private equity community seeking a home. The inherent flexibility of private equity is enabling owners to achieve a range of objectives, be it selling a minority stake in the business, introducing a majority investor or achieving a clean exit. Claire points out that, for companies that may not quite be ready to IPO (primarily for reasons of youth or scale), introducing a private equity investor may be an attractive stepping stone to the eventual float.

When choosing which option is right for private owners or families, considering the rationale and timing of the sale are vital. Weighing up such a decision, Jeremy identifies three important factors which need to be considered; the fitness and needs of the business, buyer and investor appetite, and market conditions. The financial performance of the business is a key driver of potential value. Timing the transaction should ideally correspond with a moment of high momentum to underpin prospective purchasers’ and investors’ confidence in the business. Having an established and proven management team is also crucial, in particular if the owners are looking to exit the business. Acquirers and investors will place great emphasis on the management team’s experience and track record, vision for the future and plan for delivering growth and shareholder value.

With the prospect of an unsettled Winter, companies that demonstrated a V-shaped recovery following the Spring lockdown driven by sensible management decisions are proving most attractive to investors. However, correctly timing the sale and ensuring a robust management team requires preparation and planning, which becomes more challenging if a sale is provoked by an unsolicited offer from a buyer. In any sale, whether an unsolicited offer or a planned process, a company should expect intense scrutiny of its financial affairs. Preparation is of the utmost importance to ensure that any issues that might adversely affect value are dealt with and that the opportunity is presented in the best possible light. Additional and ongoing investigations should be anticipated for those who wish to float their business on the public markets. it is essential to have prior experience of operating a listed company within the management team, in particular the CFO, as well as a credible non-executive team.

Jeremy, Simon and Claire also discuss the potential timeline of the process and how to factor this into decision-making and planning, as well as the role of the investment banker to support and advise the client. Rounding up the discussion, Helen asks all three advisers what they have found to be the most common obstacles to a successful sale and how to avoid them. While Jeremy emphasised the importance of management being sufficiently well supported to be able to focus all of their energies on the business without undue distraction from the transaction, Simon emphasised the importance of managing buyers’ and investors’ expectations during the process by delivering the financial performance that they say they will at the outset of discussion. Claire reaffirms the unpredictability of capital markets and therefore advocates the importance of always having a Plan B.


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