After all the years of hard work, blood, sweat and in all likelihood, a few tears, realising a strategic value on the sale of your business will make it all worthwhile. Private equity partners work closely with their investee companies to ensure the best possible outcome for all the stakeholders in a business: the management team, employees, customers, suppliers and shareholders alike.
Some of the aspects that we at YFM Equity Partners have found to be crucial in maximising the return on investment include:
Establish early what the key things are that are likely to attract the most buyers and increase the achievable valuation. All key decisions should be about delivering these elements that may make all the difference between an acceptable outcome and one that knocks it out of the park.
Your private equity partners should always work with corporate finance advisors at exit to give the best chance of a good outcome. Key aspects in selecting who to work with to sell the business will include personal chemistry between the management team and members of the corporate finance team (important when the stress levels mount!), knowledge of your sector and potential buyers, international reach, lots of experience of doing deals in your marketplace (be it SME, mid-market or larger deals), etc.
In conjunction with your shareholders and Corporate Finance advisors, decide which strategy is likely to achieve the best outcome for your company: will it be marketing to a wide pool of potential buyers or targeting a more select group of buyers who you believe will be most excited and pay a premium price?
Succession planning is important to both give the new owner the confidence that there are the right people in place at the right levels of your business to provide continuity, as well as giving senior Board directors as much optionality as possible as to when they can depart the business.
Getting your housekeeping in order will add considerably to the ease of transacting the deal. Things to consider here are legal matters such as employee contracts, leases, etc as well as matters such as ensuring patent and IP documents are in place and up to date. On a personal level, the shareholders should ensure that good tax planning advice has been sought as early as possible in any transaction.
Whilst there will of course be different drivers for exit, getting your timing right is key. Considerations here include the macro environment, where your company is in its growth story and factors specific to your industry.
A trade sale process will be one of the most time-consuming things the management team undertakes, particularly the CEO and CFO. It is therefore important that the senior teams ensure it has put in place the means for the business to continue to function and perform during this time – there’s nothing like a drop off in trading to spook a buyer.
I set out here some of the aspects to consider when the time comes to capitalise on all the hard work. Since 2004, YFM has realised 35 investments and returned proceeds of over £100m to its core managed funds.