There’s a lot to consider when selling a business. Anecdotal evidence suggests that many businesses are heading for the exit.

Smaller firms might be able to get everything in place for a fast exit, but if you’re more established, then it will be a tougher task. Selling a business can take a minimum of six months and often a lot longer. Try not to rush to market, you risk getting squeezed on price, as the buyers can use the current climate to their advantage.

If you’re looking for the exit door, then there’s a lot to consider. To help you I will kick off with an overview of the different types of sales you can make.

There are many ways to sell a business and choosing the right one for you is the most important issue to resolve first.

TRADE SALE
This is the most likely form of sale, as the buyer who is likely to value your business is going to be a competitor. You know your market and the main players, so if one of them is looking to make an acquisition, then they could be a good bet. By acquiring you they are both increasing their market share and eliminating competition and, as a result, you become more valuable. However, the difficulty is that in order to sell to them, you’re revealing yourself to the competition. And even with a non-disclosure contract in place, it’s not easy to stop word getting out and potentially causing problems with clients and staff.

Earn-outs are a common part of trade sales and other exits, so if you’re looking to get out quickly then you’re in for a tougher negotiation. You might not like the prospect of working for someone that you were once in competition with, but it’s assumed that you’re key to the company working. Once you do get out, then you are likely to be subject to some form of non-compete clause. They haven’t just bought you to then see you go off and start again. Legal assistance is required here to ensure that the clause is as narrow as possible.

SELLING OFF THE ASSETS

This can be done as a trade sale, and if you are determined not to have an earn-out period then it might be the best route. However, it’s not always the most advisable thing to do, as inevitably you get a lower pay-out, but for the buyer there are fewer problems.

On the other hand, it depends on what you have to sell. If you have a clutch of long-term contracts and a freehold, then you could make good money, but ultimately there will be parts you can’t sell.

MANAGEMENT BUY-OUTS (MBOs)

MBOs aren’t easy to do and typically take many years to get in place. The main problem with an MBO is that your management has to be of a certain calibre to attract funding to buy you out. Also, it helps if they have sufficient levels of cash to put into the pot themselves in order to convince investors that they are committed to the cause.

Typically, MBOs will produce a lower price tag than a trade sale, as the competitive element between buyers is removed. They are often quite an emotional experience for those involved, as you slowly see the business you’ve created move over to your team. However, there can be a satisfying element in knowing that your ‘baby’ is in safe hands.

MANAGEMENT BUY-INS (MBIS)

There are groups of talented people out there who want to work together and are actively seeking hot prospects. They are likely to be committing their own cash and have backers whom they are close to. Essentially, it is a take-over and can provide a good exit route. Specialised advice is required here to maximise value and ensure you get the deal you want, as MBIs can be complex and involve interactions between a large number of parties.

If you would like further information and advice then please click here