Introduction
Selling your business is a complex process, and while it can be done at speed, it should never be rushed. Prioritising speed at the expense of best practice can be costly, not only to you as the shareholder financially, but also for the staff and legacy you leave behind. That being said, there are two key things you can do to limit/eliminate delays:
- Prepare thoroughly – this will reduce any delays in due diligence
- Appoint the right advisors who are motivated to achieve the best outcome for you.
2024/25 is a good time to consider a sale and offers a great opportunity to anyone seeking the right exit. The UK is an attractive market for overseas acquirers – we receive interest from overseas companies in almost every business we take to market, and over 50% of our completed transactions involve overseas acquirers. Acquisitions remain an attractive option for businesses seeking growth, either by consolidating market share or diversifying a portfolio.
1. Favourable Market Conditions
Current market conditions remain favourable for business sales. Download our market update report. It should be noted that the perfect market conditions are extremely rare, impossible to predict and fleeting. However, it’s encouraging to see that while market conditions do have an impact on business sales, this impact is usually fairly small for the SME sector. Other factors such as business performance and future prospects typically have a much greater influence.
2. High Demand for SMEs
UK SME businesses are in high demand, both from overseas companies (the UK is the second most targeted nation in terms of acquisition) and from UK-based strategic buyers.
Larger businesses and investment funds find it easier to grow market share, expand geographically, gain technological expertise, and access product IP through acquisition rather than grow these areas organically. Leveraging this high demand can lead to quicker deals, better prices, and more favourable terms.
3. Favourable Tax Environment
Most business owners share a common goal when they sell their business, to realise the value they have built into the business over the years of hard work and dedication. Selling the business remains a tax advantageous way of achieving this goal. The extent of this advantage is subject to government policies and may change over time, but it generally remains a good option from a tax perspective. It’s important to seek advice from a reputable tax advisor to fully understand your personal tax situation before making any assumptions.
4. Fewer Regulatory Hurdles
There are some very attractive exit options available to business owners – Employee Ownership Trusts for example can offer a relatively quick and painless sale journey. However, there are a number of hurdles as well as benefits like tax exemptions and avoiding negotiations. To prevent unnecessary delays, it’s important to seek proper guidance before considering this as an option.
5. Strong Buyer Financing Options
One of the primary causes of delays in selling a business is buyer financing. You may have found a company that is a good fit and is willing to make a good offer, but if they have to borrow significantly to make the acquisition, the process will be dictated largely by the source of that funding rather than the buyer. Our approach is to conduct thorough research to ensure that any potential buyer we present can afford the acquisition from their own funds or because they are backed by significant capital – for example, from a Private Equity house.
6. Technology-Driven Efficiency
The dealmaking landscape has been changed by advancements in technology, much as every other industry. The rapid improvement of online meeting platforms in the last 4 years has all but eliminated the need for travelling long distances, and virtual meetings have become the norm rather than the exception. Coupled with advancements in digital security allowing virtual data rooms and digital signatures, this has significantly improved the speed with which deals can be completed.
7. Maximising Value in a Competitive Market
Sellers who find themselves in a competitive market with multiple offers on the table will notice a positive impact on aspects such as price, terms and speed. However, competitive positions rarely happen on their own. The best deals result from a carefully prepared and proactive approach to multiple well researched prospective acquirers.
8. Buyers Looking for Stability
The economics of scale in business mean that as companies get bigger, it becomes more difficult for them to achieve significant growth. For instance, gaining a new client worth £100k would result in a 2% increase in sales for a business with a turnover of £5m, but it would barely register with a company turning over £100m. As a result, larger companies often look to acquire a portfolio of complementary businesses to provide a buffer against any fluctuations in economic conditions.
9. Generational Shifts in Ownership
A well-known fact is the high proportion of UK businesses that are owned by the ‘Baby Boomer’ generation, this is the generation that is currently retiring. With fewer businesses than ever being passed on and kept within the family, the market is seeing a high demand for these businesses as buyers look to capitalise on the situation.
10. Faster Exit Strategies
Understanding the strategic landscape of business sales is essential for securing a good deal quickly. Quick sales can often lead to prolonged negotiations, price chipping, and extended earnout periods. This is where an experienced M&A broker/advisor can provide significant value. They can see the big picture, understand your sales goals, and most importantly, know how to achieve them.
Conclusion
Selling a business fast should never come at the expense of selling it right, although there are some things you can do to speed up the process. Preparation is key, make sure the business is ready, the financials are well presented and evidenced, potential acquirers are thoroughly researched with a strong motive for purchase in mind, and you have the right advisors in place to guide you through the complexities of getting the right deal.
If you want to talk to someone about selling your business and start exploring the right strategy and approach for you, please get in touch.
