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01 Disclaimer This presentation (Presentation) is being issued by - - PowerPoint PPT Presentation

01 Disclaimer This presentation (Presentation) is being issued by TheNonExec Limited (Provider) to you (Recipient), in connection with an online webinar (Webinar) given by Provider to Recipient. The Presentation is


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This presentation (“Presentation”) is being issued by TheNonExec Limited (“Provider”) to you (“Recipient”), in connection with an online webinar (“Webinar”) given by Provider to Recipient. The Presentation is provided as part of a facilitated discussion on the process of selling a company. In itself and/or as part of the Webinar, it does not constitute advice nor purports to provide a definitive guide to selling the Recipient’s company. The information in this Presentation, which does not purport to be comprehensive, has been provided by the Provider and has not been independently verified. While this Presentation has been prepared in good faith, no representation or warranty, express or implied, is or will be made and no responsibility or liability is or will be accepted by the Provider, or by any of their respective officers, employees, consultants or agents in relation to the accuracy or completeness of this Presentation or any other written or oral information made available to Recipient or its advisers before or during the Webinar and any such liability is expressly disclaimed. In particular, but without prejudice to the generality of the foregoing, no representation or warranty is given as to the achievement or reasonableness of any estimates, forecasts, valuations, prospects or potential returns contained in this Presentation or in such other written or oral information. Recipient acknowledges and agrees that no person has nor is held out as having any authority to give any statement, warranty, representation, or undertaking on behalf of the Provider in connection with business valuation(s) that are subject to various market forces both in the present and future. The Provider gives no undertaking to provide the recipient with access to any additional information or to update this Presentation or any additional information, or to correct any inaccuracies in it, which may become apparent. This Presentation shall not exclude any liability for, or remedy in respect of, fraudulent misrepresentation. By accepting this Presentation, Recipient agrees to be bound by the foregoing limitations.

Disclaimer

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As a general average across the large business brokers across the UK, typically 5% - 30% companies that are put ‘up for sale’ go on to a successful sale. So that means 70% - 95% fail to sell.

A Sobering Statistic

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The Art & Science of (Successfully) Selling A Business

A B C D

To understand how to sell a business successfully, you first need to ask…

Who is best placed to sell my business? How can I aim for the “best price”? What do I need to prepare in readiness of exit? Are there any pitfalls that I need to be aware of?

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Obvious reasons

  • Retirement / no family succession / time to ‘cash out’
  • It can generate life-changing capital

Non-obvious reasons

  • Business has reached its limit under current ownership (skills / knowledge)
  • Competition is getting harder
  • Simply time for a change…

But First, Why Sell A Company?

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SME Definition

MICRO COMPANIES SMALL COMPANIES MEDIUM SIZED COMPANIES LARGE SIZE COMPANIES

£1M - £10M revenue 10 – 49 employees £10M - £49M revenue 50 – 249 employees £50M - £200M revenue > 249 employees < £1M revenue 0 – 9 employees

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UK - 2019

MICRO COMPANIES SMALL COMPANIES MEDIUM SIZED COMPANIES LARGE SIZE COMPANIES

211K companies 36K companies 8K companies 1.1M companies Plus 4.4M businesses with zero employees…

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1.10 0.95 0.60 0.58 0.57 0.50 0.42 0.38 0.12 0.36 0.24 0.10

  • 0.20

0.40 0.60 0.80 1.00 1.20 London South East East of England North West South West West Midlands Yorkshire & Humber East Midlands North East Scotland Wales NI

NUMBER OF PRIVATE SECTOR COMPANIES BY REGION 2019

08

South-West – a key driver of UK Plc

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  • Business ads / business broker
  • Very difficult to sell...

Facilitating An Exit

NON-EMPLOYERS / MICRO-BUSINESS SMALL COMPANY MID-SIZED COMPANY LARGE COMPANY

  • Business broker
  • Boutique M&A firm
  • Corporate finance
  • Regional accountancy firm
  • Boutique M&A firm
  • Corporate finance
  • National accountancy firm
  • M&A firm
  • Corporate finance
  • National accountancy firm
  • Investment bank
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  • BUYERS MARKET

Buyer – Seller Power

NON-EMPLOYERS / MICRO-BUSINESS SMALL COMPANY MID-SIZED COMPANY

  • BUYERS MARKET
  • BUYER-SELLER MARKET

BALANCED

  • SELLERS MARKET

Generalised – there of course exceptions to the rule!

LARGE COMPANY

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Valuation – Differing Approach

02 01 03 04

EBITDA multiple Net asset value / book value Discounted cashflow Revenue multiple

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EBITDA – The Key Metric

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EBITDA – The Key Metric

£0.5M is the typical MINIMUM threshold for buyer interest £1M is the most requested baseline…

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EBITDA Multiples…

M: 1 – 4 Commoditised offer IP zero Low growth Low returns Market share: no measure M: 4 – 6 Differentiated offer IP light Reasonable growth Average returns Market share: low M: 6 – 10 + Highly differentiated offer IP strong Strong growth Above average returns Market share: growth / high

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The Value Trap – Shareholder Expectation

NON-EMPLOYERS / MICRO-BUSINESS SMALL COMPANY MID-SIZED COMPANY LARGE COMPANY

Shareholder expectation of market value can be disproportionately high National business brokers market potential valuations in excess of market norms….

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Understand Your Buyer

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Sale Process – Best Practice

  • 1. Business USP?

To understand the business and what makes it special

  • 2. Ideal Buyer?

Profile the buyer that will value the business at its highest

  • 3. Market Research

Forensic research for companies that match the ideal buyer profile

  • 4. Financial Analysis

Model the financials to demonstrate value and future synergy

  • 5. IM

Prepare a compelling Information Memorandum (IM)

  • 6. Market Outreach

Confidentially approach CEO’s of target buyers

  • 7. Negotiation

Negotiate between buyers to strike best

  • ffer & term sheet
  • 9. DD & Closing

Legal, tax and financial due-diligence, SPA and closing

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Some of the key factors that regularly trip many sellers up…

  • Prior share transactions invalid
  • Tax issues (e.g. IR35 related issues) – open or potential
  • Weak management data & systems – inconsistency or inaccuracy in data
  • Reliance on book-keeper / quasi-accountant for management data – good enough for trade, but not good

enough for DD…

  • No management team visibly leading the business in lieu of shareholders
  • No management incentivisation for successful exit
  • Inconsistent EBITDA
  • Choosing the wrong advisory team…

Being Ready… (AKA. “THE PITFALLS”)

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Working With Advisors

M&A or Corporate Finance Advisor

  • Finds a buyer
  • Grooming, deal structure, heads-of-terms
  • Co-ordination of all advisors

Accountant / tax specialist

  • Supports the due diligence (DD) phase
  • Tax planning & treatment within the SPA

Commercial Lawyer

  • Prepares Sales & Purchase Agreement (SPA)
  • Negotiates SPA with buyers legal team
  • Supports the legal process throughout
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Working With Advisors

M&A or Corporate Finance Advisor

  • Finds a buyer
  • Grooming, deal structure, heads-of-terms
  • Co-ordination of all advisors

Accountant / tax specialist

  • Supports the due diligence (DD) phase
  • Tax planning & treatment within the SPA

Commercial Lawyer

  • Prepares Sales & Purchase Agreement (SPA)
  • Negotiates SPA with buyers legal team
  • Supports the legal process throughout

Many different flavours…

  • Accounting firms
  • Business brokers
  • Business transfer agent
  • Corporate finance firms
  • Investment banks
  • M&A boutiques…
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The Art & Science of (Successfully) Selling A Business

A B C D

To understand how to sell a business successfully, you first need to ask…

Who is best placed to sell my business? How can I aim for the “best price”? What do I need to prepare in readiness of exit? Are there any pitfalls that I need to be aware of?

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Boutique M&A