Mergers And Acquisitions Questions And Answers
Here are some of the key questions many business owners ask us - we hope you find the answers helpful. If you have a specific question, please don't hesitate to contact us - we can offer a free, confidential, no-obligation meeting to discuss your business and the market for business sales in detail.
I've already been approached by an acquirer. What do I do now?
The first thing you need is specialist advice, as selling a business is complex and time-consuming. Professional representation is essential, even if you really want to sell to this acquirer and you feel it is the best ‘home’ for your business.
The other thing to bear in mind is that your potential acquirer clearly has a strong motive to acquire – and that might mean your business is desirable to other companies too. What are you missing by not approaching other organisations? And will you get the best price, and the best outcome for your customers and staff if you only negotiate with one party?
With BCMS’ tailored service, you can begin negotiations with your interested party, while exploring other sale options too. It might surprise you to know that in many cases, many business owners who talk to us after such an approach actually sell their businesses to another acquirer.
Find out more about how to handle offers and negotiations
How do you value my business?
There are many different methods of business valuation. A traditional ‘desktop’ valuation involves the use of a mathematical formula. In essence, this takes your company’s annual operating profit and multiplies it by a figure, usually between 3 and 7. This figure is dependent on historical trading, and past financial performance. It is typically calculated on a number of variables including the industry sector, past deals in that sector, and arbitrary metrics like return on investment over a set time period.
These numbers are called multiples – for a multiple of five, a company delivering profits of £1m would be valued at £5m under this desktop method.
BCMS’ track record over 600+ deals in the last decade proves that this multiple-based mathematical calculation is not reflective of the real-life, true value of your business. Acquiring a company is principally about strategic motive, and on many occasions the final price paid far exceeds any standard industry valuation. In addition, a company’s true value lies in its future potential, not its past historical performance.
BCMS never takes a company to market with a value attached for the very reason that it encourages ‘bartering’, price-chipping and bargain hunting. Only an acquirer with a strategic motive and a sense of the future potential for your business can decide its true worth, and it is our job to ensure that the market understands the scope and true value of each and every business we represent.
For more information on how to value a business
Is my business actually worth buying?
We speak to many business owners each week, and surprisingly many of them are unaware of the inherent value of their business. Some are too close to their business to appreciate its commercial appeal. Others are looking to wind the business down because with no clear succession plan in place they feel it is their only option.
Your business does not start and end with you. Your customers, your IP, your contracts, your staff expertise, your brand, your portfolio, your relationships, your reputation – all these things have a potential value to an acquirer.
For more information on what really matters when selling a business
I’m not ready to sell – why should I start planning now?
Preparation is a key factor in any business transaction. The better prepared a business owner is for the sale process – in terms of administrative matters such as financial reporting, documentation, accreditations, sales contracts – the smoother the business sale process can be.
We have clients who have successfully sold with BCMS 5 years or more after first contacting us. Many meet with us and, following our advice, decide to put an action plan in place to improve their business’ saleability. We can share case studies and analysis on companies similar to you who have sold, so you go away with a clear idea of your positioning in the marketplace.
Take a step back and analyse why an acquirer would buy you. Is it your IP, your client base, your staff? Specialist, niche skills you possess? If you start examining your strengths and weaknesses as a business today, then there is time to make positive change to maximise the value of your business when the time comes.
For more information on planning for the sale of a business
What will happen to my staff?
A key driver for many business owners is securing not only the best future for their company, but also their staff. The major shareholders may count staff as friends, not just colleagues. In a family business, the relationships can be even closer.
BCMS understands this – and seeks to work with you to find the right option for your company. We never force you to take, or reject any offer. We advise you on a communication strategy that will help you to explain the sale process to your staff, at the right time. Open, honest, communication is key, and the right sale can rejuvenate a business, delivering exciting new opportunities for your team.
It is usually not in the acquiring organisation’s interest to buy your business and instantly shed experienced employees – the very people who have helped to make it successful in the first place.
Who is the most likely acquirer for my business?
This of course is dependent on your sector, and your area of business operations.
The most obvious organisations to approach would typically be key regional competitors, or larger businesses who offer similar services. But we regularly identify the best buyers to be complementary acquirers, both in your home country or internationally - around 25% of all BCMS clients sell to an overseas acquirer. A likely acquirer might have slightly different specialisations or business operations, or feature at a different point in your supply chain.
Every sector is different, but the main reasons for acquisition are typically stated as strategic expansion, access to customers, and access to new specialist skills.
For more information on how to find buyers for your business
How long will it take to sell my business?
Selling a business is a labour intensive process. Today’s acquirers and investors are risk-averse, and understandably will undertake extensive due diligence and checks to ensure they are getting value for their investment.
There are many variables beyond your control that can delay a deal. These could include changes in the acquirer’s circumstances (such as access to funding), or wider changes in the market. Regardless, it is important that any company looking to sell has its business administration up to date. This will help avoid unnecessary delays.
This is why we recommend you allow at least 12 months for the entire sale process, from the time you engage a specialist advisor to exchange of contracts and completion. Although BCMS has completed deals in a matter of months, this is not the norm. We allow three months for preparation before we even begin to approach potential acquirers.
Find out more about the business sale process