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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 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. 02
A Sobering Statistic 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. 03
The Art & Science of (Successfully) Selling A Business To understand how to Who is best placed to sell my business? A sell a business successfully, you first How can I aim for the “best price”? B need to ask… C What do I need to prepare in readiness of exit? Are there any pitfalls that I need to be aware of? D 04
But First, Why Sell A Company? 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… • 05
SME Definition < £1M revenue 0 – 9 employees MICRO COMPANIES £1M - £10M revenue 10 – 49 employees SMALL COMPANIES £10M - £49M revenue 50 – 249 employees MEDIUM SIZED COMPANIES £50M - £200M revenue > 249 employees LARGE SIZE COMPANIES 06
UK - 2019 1.1M companies MICRO COMPANIES 211K companies SMALL COMPANIES 36K companies MEDIUM SIZED COMPANIES 8K companies LARGE SIZE COMPANIES Plus 4.4M businesses with zero employees… 07
South-West – a key driver of UK Plc NUMBER OF PRIVATE SECTOR COMPANIES BY REGION 2019 1.20 1.10 1.00 0.95 0.80 0.60 0.58 0.57 0.60 0.50 0.42 0.38 0.40 0.36 0.24 0.20 0.12 0.10 - London South East East of North West South West West Yorkshire & East North East Scotland Wales NI England Midlands Humber Midlands 08
Facilitating An Exit Business ads / business broker Business broker • • Very difficult to sell... Boutique M&A firm • • NON-EMPLOYERS / Corporate finance • SMALL COMPANY MICRO-BUSINESS Regional accountancy firm • Boutique M&A firm M&A firm • • Corporate finance Corporate finance • • MID-SIZED National accountancy firm National accountancy firm • • LARGE COMPANY COMPANY Investment bank • 09
Buyer – Seller Power BUYERS MARKET BUYERS MARKET • • NON-EMPLOYERS / SMALL COMPANY MICRO-BUSINESS BUYER-SELLER MARKET SELLERS MARKET • • BALANCED MID-SIZED LARGE COMPANY COMPANY Generalised – there of course exceptions to the rule! 010
Valuation – Differing Approach 01 EBITDA multiple 02 Discounted cashflow 03 Revenue multiple 04 Net asset value / book value 011
EBITDA – The Key Metric 012
EBITDA – The Key Metric £1M is the most requested baseline… £0.5M is the typical MINIMUM threshold for buyer interest 013
EBITDA Multiples… M: 1 – 4 M: 4 – 6 M: 6 – 10 + Commoditised offer Differentiated offer Highly differentiated offer IP zero IP light IP strong Low growth Reasonable growth Strong growth Low returns Average returns Above average returns Market share: no measure Market share: low Market share: growth / high 014
The Value Trap – Shareholder Expectation NON-EMPLOYERS / SMALL COMPANY MICRO-BUSINESS Shareholder expectation of market value can be disproportionately high MID-SIZED LARGE COMPANY COMPANY National business brokers market potential valuations in excess of market norms… . 015
Understand Your Buyer 016
Sale Process – Best Practice 1. Business USP? 2. Ideal Buyer? 3. Market Research 4. Financial Analysis To understand the Profile the buyer that Forensic research for Model the financials to business and what will value the business companies that match demonstrate value and makes it special at its highest the ideal buyer profile future synergy 9. DD & Closing 7. Negotiation 6. Market Outreach 5. IM Legal, tax and financial Negotiate between Confidentially Prepare a compelling due-diligence, SPA and buyers to strike best approach CEO’s of Information closing offer & term sheet target buyers Memorandum (IM) 017
Being Ready… (AKA. “THE PITFALLS”) 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… 018
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 • 019
Working With Advisors M&A or Corporate Finance Advisor Many different flavours… • Accounting firms Finds a buyer • • Business brokers Grooming, deal structure, heads-of-terms • • Business transfer agent • Corporate finance firms Co-ordination of all advisors • • Investment banks Accountant / tax specialist • M&A boutiques… 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 • 020
The Art & Science of (Successfully) Selling A Business To understand how to Who is best placed to sell my business? A sell a business successfully, you first How can I aim for the “best price”? B need to ask… C What do I need to prepare in readiness of exit? Are there any pitfalls that I need to be aware of? D 021
Boutique M&A 022
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