Timing the sale or exit from a business is critical and there are a number of factors to consider besides the very important aspects of personal life-style changes and goals. Other considerations such as the continued growth and sustainability of the business are very important to a buyer. These considerations will therefore affect the maximization of the sale value, says George New, Manager, Horizon Capital, a corporate finance and asset management company that specialises in the sales and acquisition of medium-sized enterprises.
Very salient ‘sell factors’ to consider are:
- Retirement - retire totally or partial retirement – most buyers will want the owner to stay on for a predetermined period, full time or on a scaled-back basis. The age of the business owner and management team is critical to the buyer who not only needs continuity in the business but also an energetic and enthusiastic management team. An ageing owner and management team adds risk and costs to the buyer who will factor this into his offer price ie don’t leave a sale until the management team are perceived to be too old to provide the continuity of a hand over period.
- Diversification of personal assets – in an uncertain world, particularly at a time like this where business values in South Africa are at historic highs, realising this value and preserving the wealth you have accumulated timeously is critical and best achieved by diversification into different asset classes, and possibly offshore investments.
- Capital growth requirement – buyers want to see the past growth record as well as potential for future growth. Businesses need capital to continue growing – don’t inhibit your business’ growth because you do not wish to inject more capital from personal funds. If this is the case it is often time to get out. A larger firm will provide the growth funding, broader distribution channels, manufacturing efficiencies, and the like, to ensure continued growth. An earn-out period with a growing company can be of benefit to both buyer and seller.
- Preparing the business for sale - to maximise the value of your business there are a number of time-consuming activities that must be attended to prior to seeking a suitable buyer.
As mentioned, when considering the sale of your business there are many factors that must be taken into account both from a personal and business perspective. Selling a business can be a very complex and time-consuming proposition with many legal, tax, accounting and regulatory issues to address. Expertise is also required to seek and identify the appropriate buyer for a business and then negotiate and structure the most advantageous transaction for both parties involved.
The decision to sell could well be the most important decision a business-owner will make. It is vital that a qualified professional corporate finance advisor be appointed to guide you through the sale process.
George New explains that Horizon Capital offers a full turnkey solution for the seller – from assisting the owner to prepare the business for sale, conducting a valuation, preparing an Information Memorandum and discretely taking the business to the market and introducing it to qualified potential buyers. Very importantly Horizon Capital negotiates on behalf of the seller to ensure the optimal deal structure, and a fair price, is realised. George adds that part of the service offered by Horizon Capital includes overseeing the sale agreement and supporting documents, as well as facilitating the transaction payment.