How to sell a business for its maximum value

About Jonathan Lea

Jonathan is a specialist corporate and commercial solicitor who has over 11 years of experience at both large international City firms and smaller practices. For the last two years he has worked on a self-employed basis with a network of other freelance lawyers focused on entrepreneur-led businesses. If you'd like a competitive quote for any legal work please send an email to the address on the home page. You can also follow him on Twitter @jonathanlea

I recently hosted a leading international business sales agency to talk about how they sell private companies and maximise their sale price.

 

The following were among the insightful and useful points that were discussed:

 

  • Avoid passivity: You need to be proactive in identifying the most suitable and appropriate potential acquirers.  You or your agent should maintain a large database of potential buyers and employ a research team to identify the best prospects.  The most suitable acquirers are rarely considering an acquisition, hence why you need to take the opportunity to them.

 

  • Purchaser motives: The value of a business is rarely related to traditional return on investment (ROI) measures.  Motives of purchase very widely, although there are two motives which have the greatest positive impact on achieving a maximised sale price. These are the quality, stability and longevity of a company’s client base and a company’s potential for growth.  Other motives include access to a company’s market, access to key technologies, acquisition of a skilled workforce and entry into the UK market by an overseas company.

 

  • Bidder competition: This factor exhibits a greater degree of influence over the sale price than any other.  However, not only must there be a choice but the competing organisations must be strategically motivated and financially capable of making competitive bids.  Bidder competition can also speed up the time taken to sell the company and improve the general terms of the deal.

 

  • Selling the future:  A company’s history has little or no value to a potential acquirer; it is the future that contains value.  Purchasers will not necessarily be looking at a company’s history, but will be analysing how the business will be performing in the future once the acquirer has applied their own finances, sales skills, customer base and other resources.

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