The above marketing slogans typify brokers’ websites in the UK – but the most effective way to sell your business is not attributable to a magical “unique approach”.
A focused and successful approach requires:
- Hard work. There are no shortcuts. Recognising that a client has spent many years growing their business and deserves to be given the best opportunity to gain the right outcome, we know that a successful sale demands hundreds of hours of professional time to ensure the best results at every stage.
- Professional experience. Our award-winning team are professionally qualified with many years’ experience of selling businesses.
- Powerful subscription databases. Many brokers choose to forego access to such databases due to their high cost. These databases are critical to our process – enabling us to identify prospective purchasers worldwide. Operating without them focuses dependency upon an advertising based approach as opposed to a research based approach.
- A “hands on” approach throughout the process. In addition to the important marketing stage to find the right buyer, as qualified professionals we will advise on financial and commercial issues – project managing the process through to legal completion.
You may find these questions helpful when considering appointing an adviser or broker, to help you better understand how they would approach your company sale – and if they are equipped with the appropriate experience.
Different approaches to selling a business
Deciding on the sales approach to adopt when selling your business and then choosing who to appoint are important decisions.
The differences in approaches are highlighted below.
Websites advertising business sales
While the above is a low cost option, and may be appropriate for selling businesses of a similar type, (e.g. pubs, shops, hotels) you are relying on chance that potential purchasers see your advert. You are likewise unlikely to receive much advice on what your business could be worth to the right buyer. If reasonable offers are made, you are unlikely to receive any support to negotiate the commercial or financial obstacles to completing a sale.
Many business brokers claim they can achieve maximum selling prices for company owners. Because brokers are invariably aiming to sell a large number of companies at any one time, their approach to finding buyers often relies on placing adverts on business sale websites and using mass marketing campaigns. This approach relies on chance that a prospective buyer sees the advert.
Corporate finance advisers
Corporate finance advisers usually take a more proactive approach to selling a company. This route eliminates chance and luck as much as possible and harnesses the experience and professional judgement of the adviser to reach a deal.
Corporate finance advisers are almost always professionally qualified, having undergone many years of rigorous training, before specialising in advising on company transactions. Their approach places a stronger focus on in depth research, analysis and professional judgement, and they are well placed to seek out solutions to issues which arise along the way and could lead to a sale falling through.
Corporate finance advisers (continued)
A corporate finance adviser will usually:
- Give you a realistic valuation of your business, based on professional judgement and recent transaction history in your sector. Some brokers present very high and unachievable valuations by using the valuation as a sales technique – in the belief that the broker providing the highest valuation will win the assignment.
- Provide an insight into recent M&A activity in your sector and what this means for your business. Most brokers choose not to invest in subscription databases that are required to comprehensively research recent deal activity.
- Assess your full range of options, including, for example, whether a management buyout is the most appropriate exit route. Brokers are highly unlikely to be able to advise on anything other than a trade sale – seldom giving any thought or time to alternatives.
- Conduct in-depth research into potential buyers for your business. As highlighted above, brokers are more likely to use an advertising based approach as they usually do not have access to the subscription databases required for a research based approach.
- Prioritise potential buyers into those with the greatest strategic fit, available funds and a track record in successfully completing acquisitions. This information is sifted and analysed from the research carried out to identify potential buyers. Brokers seldom have the information available to prioritise buyers in this way.
- Make direct, personalised approaches to potential buyers to encourage offers. These approaches should be made directly by an adviser with the skills and experience to clearly explain the acquisition opportunity and its potential interest to that prospective purchaser. This is an important first step in starting to build a relationship with a prospective buyer, understanding their motives and the strategic thinking of their organisation and ultimately encouraging them to submit their best offer. This discussion will almost always be with a board director or member of the senior management team. In stark contrast, some brokers regard contacting the list of potential purchasers as a task for administrative staff. Making initial contact with buyers requires the skills and commercial acumen of experienced and professional staff.
- Provide hands on support throughout the whole process, with a significant amount of the adviser’s time being invested after a preferred purchaser has been chosen and their offer accepted. A corporate finance adviser will usually continue to be involved on a daily basis during the weeks or months between an offer being accepted and the legal completion. A broker will usually have limited, if any, involvement at this stage.
- Find solutions to commercial and financial issues arising during negotiations, due diligence and the legal phase. Corporate finance advisers are equipped with the professional knowledge and experience to be well placed to find solutions.