Any item for sale benefits from quality presentation, whether it be a bottle of perfume or a three piece lounge suite. Businesses are no different. An owner manager who allows him or herself time to gift wrap their company and put on a big bow for good measure will reap substantial rewards.
Undertaking the “wrapping and packing” takes time – anything up to three years – but it is time that is so so well spent.
A sale of a business involves assessing purchaser appetite, finding the buyer who will pay the highest price and negotiating the deal. A disposal planned over a period of time follows the same procedures, but only after the business has undergone changes that enhance its appeal dramatically.
Managing those changes is the key to improved sale value and those changes can be brought about extremely cost effectively by the appointment of change management consultants typically at no higher annual cost than an average secretary and certainly less than a top personal assistant.
Maximise potential
A corporate finance house that offers change management consultancy will install a change manager in a business, with the sole responsibility of identifying areas where change is needed, drawing up a strategic plan for implementing the change, all with the objective of maximising potential purchaser appetite.
Throughout the implementation of the plan the manager will be totally focused on the exit objectives of the owner/manager, offering relevant M & A advice to dissect the whole process.
The plan will concentrate heavily on the strategic changes to enhance potential purchaser appetite but will also look at “housekeeping” matters. It is amazing how many deals fall over or suffer a reduction in price achieved because relatively simple problems are unearthed during due diligence. It isn’t unknown for actions that would have cost £5,000 to implement at the appropriate time bringing down the sale price by £100,000 just because they were not acted upon earlier.
These areas can include accounting systems, health and safety, legal issues, environmental considerations and site presentation.
A plc (who is likely to pay the highest price for a business) is unlikely to look twice at any company with suspect financial systems. The change manager will identify any weaknesses and recommend remedial action – even if that means the appointment of a new financial director. At the end of the day good financial systems will drive profits and produce many operational benefits along the way.
A squeaky clean safety audit is worth a fortune – we all know that this element of a company’s operation is one of the biggest nightmares with which to contend.
Deal with any issues
Disputes over title and ownership of land can get bogged down in protracted legal arguments; if the problems are identified and resolved before the sale process gets a full head of steam they don’t become time critical, and don’t have an adverse effect on the price achieved.
Environmental issues are, as we know, becoming increasing critical in all aspects of company life. A contaminated site is a difficult site to sell, and a messy shambolic site can be a deterrent to a sale. Potential purchasers who have made initial offers for a perfectly profitable business can often simply walk away after the visit to an unattractive and unappealing location.
So much for housekeeping
Critical Sale Factors, including analysing management capability and options post sale, customer spread, market penetration and contract analysis are equally as important in the preparation of maximising the sale value.
Any company in which the owner manager is the heartbeat of the business will be particularly difficult to sell for a reasonable price – without a substantial “earn out” or other unattractive tie-ins. A change manager would assess the importance in the role of the existing owner and where necessary assist in the recruitment of an additional resource to the management team. This can’t be done in the short term and needs to be carefully planned.
However, this throws up the question: is the management team strong enough to cope with the additional burden and demands? If not, it would be necessary to bring in new people at director level – filling managing, finance, sales or operational director positions. A team seen to be strong is eminently backable, and the vendor reaps the reward in an enhanced sale value.
Getting the right team
Building up a skilled effective and professional management team can be done in months but getting them to full potential takes much longer – as does the input required to build up and consolidate an attractive customer base. Any business, no matter how profitable, with over dependence on one or a few key customers will command a significantly lower sale price than one with a more even spread of income.
It must be remembered that a change manager is more than a management consultant – he or she undertakes a pivotal role, identifying problems and overcoming them while the owner/manager continues to run the business and not take his or her eye off the ball to deal with the M & A matters that are constantly at the forefront of the change manager’s thinking.
Another important consideration is confidentiality; any appointed consultants should be aware of the delicate nature of their role. It is imperative that the service is seen to add continuing value to the business by staff and not simply a checklist for selling the company as this could undermine the whole process.
The result can be an increase in price by 2-3 times what would otherwise be achieved. Alternatively, it could result in a disposal that would otherwise fail going through to legal completion.
Any owner manager with the luxury of time should seriously consider change management now to attract potential purchasers with heavy wallets who will be in a position to write out hefty cheques in time for the arrival of the Olympic torch in London in 2012.
