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Selling a business in a post-Brexit world

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It’s the most common question we get asked by UK business owners – ‘I want to sell, but what about Brexit?’

It’s a fair point. But ultimately, Brexit is not an issue that should be keeping any business owner awake at night.

In truth, all company sales originate from a mix of business and personal circumstances unique to the vendors.

Retirement, planned exits, and de-risking investment come up a lot with our clients. But the time to sell up is just as often prompted by events from unrelated corners of life too – a divorce, caring for a relative, or burnout – can also lead the shareholders to start a sale process.

We think it is misleading for advisors to offer Brexit-ready solutions. What we do advise is for all owner-directors to look for natural exit points within their business journey to find the answer to when is the right time to sell.

Selling a business in a post-Brexit worldHere are five areas to focus on:

Shareholder unity – if one or more shareholder wants to leave, that doesn’t mean all equity owners have to. In fact, a business is much more likely to sell if there is someone experienced to stay on post-acquisition. Either way, it is vital that all shareholders agree with the plan before starting a sale process

Management team – when all shareholders want to leave, it is also important to develop and empower the next management tier. If there is no one around to run the business post-sale, acquirers will view this as a risk, reducing potential sale values and deal terms

Contract renewals – equally, if your business benefits from predictable recurring revenues from long-term contracts, often the best time to sell is when the contract has just been renewed.

Lease renewal – most UK business owners rent their premises, and the next break-clause in the lease often presents a natural exit. Even though your business may be performing well, if your buyer wants to combine all or part of your business with existing operations, signing up on a long lease with no breaks can throw a spanner in the works.

Final loan repayment – if you have a loan, consider paying it off to improve your profit margin. Many buyers calculate their initial offers based on profit multiples, so if maximising value is your goal, then focus on your bottom line in the run-up to sale

Never mind the Brexit

Whatever shade of Brexit UK businesses have to work with, it’s worth remembering that a good business is a good business, and will sell in good times or bad.

That’s why one in four BCMS clients sold in the last 18 months have been acquired by EU-headquartered corporations. That’s why UK acquisition activity is at a two-year high. And that’s why you shouldn’t change your plans based on ‘what if’ scenarios.

A good business will attract interest whatever the weather if your M&A advisor knows where to look.

Find out why Brexit is a "great opportunity" here

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Posted Aug 2017
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