Jonathan Dunn, of BCMS
SO, you have built up a successful business and have one eye on selling it. But how do you know exactly when to cash in and move out?
There are plenty of reasons why entrepreneurs sell up, ranging from predictable events like retirement, to the unforeseen such as ill-health or divorce.
Using data gleaned from more than 500 company sales over the last decade alone, Kingsclere-based business sale advisor BCMS has identified six key reasons today’s entrepreneurs are selling up in record numbers.
* Retirement – one or all shareholders wish to retire.
* Lifestyle change – a health-scare, exhaustion and family commitments.
* Capital investment – scaling-up may be too big a challenge for the founder.
* Changing roles – the evolution from agile start-up to growing company demands different managerial skills. Some entrepreneurs struggle with this transition.
* Realise investment – many entrepreneurs are hardwired innovators and sell up to start something new.
* Market conditions – competitors being acquired, new entrants or major regulatory changes point to a good time to exit a venture.
Whatever the reason that drives an owner to seek a buyer, the big questions are the same – how to ensure you get the best price, and is there a right time to sell?
“Business owners are increasingly preparing their exit in more detail,” says Jonathan Dunn, executive director at BCMS.
“In practice, they are busy tying up contracts, building their sales pipeline and reducing dependency on the owners, long before their company goes to market.”
When entrepreneur Marc Noel decided to sell Aldermaston component supplier Impress Sensors, the business was in a good place.
Mr Noel: “We could have put in another five years and doubled its size, then think about selling.
“But we knew we’d have to make more investment, and we didn’t necessarily have the appetite for that.”
For Pangbourne video caption and subtitling software firm Softel, the push to sell was driven by regular unsolicited approaches.
“We had been approached by a number of companies interested in purchasing Softel,” said ex-owner Sam Pemberton.
“We wanted to make sure we got maximum value and avoided any traps or pitfalls in the process.”
A sellers’ market
With corporate acquisition activity approaching an all-time high – acquisition volumes have increased 22 per cent since the EU referendum – there is no doubt that now is a good time to sell.
BCMS’ Jonathan Dunn said: “Larger firms are under pressure from their shareholders to improve margins, and for many the best way to achieve this is by acquiring high-growth smaller players.
“When you add in private equity investors keen to back ambitious management teams, and the growing number of overseas players acquiring in the UK, it still feels very much like a sellers’ market.”