Could 2013 be year to sell up?
Mike Norrie, a director at Castle Corporate Finance in
Tonbridge, says 2013 could be the year to sell your business.
Are you prepared?
As we seem to be slowly moving forward from the longest downturn
in living memory, what does this mean for owner managed businesses
looking to sell up?
What we do know is that, although some say things might be
improving, we are not about to return to those frothy times of
That said, there is still a ready market for the right business.
Many owners have postponed the sale of their company until “things
get better” and, after five years, this could be the ideal time to
capitalise on your business’ potential.
With interest rates continuing at record lows, the larger and
quoted trade buyers are keen to invest their growing cash reserves
in sound companies.
Added to this, the private equity market has returned with
substantial cash funds and an appetite for growth opportunities. In
addition, overseas buyers –from the US and India for example – are
searching for suitable businesses in the UK. They are drawn to us,
as we are an English-speaking European (non-Euro) country with a
So the buyers and the cash are there for the right company.
What is the right company?
Well managed. Good buyers have plenty to choose from and they
have no time for poorly managed, lifestyle businesses. This means
planned management succession is important for the shareholder
looking to retire.
n Capable of growth. There is little attraction in an exhausted
business and it is essential to have a well-considered growth
- Niche. There is ready demand for companies that can
differentiate themselves. Being in the “right” sectors can ensure
strong interest too.
- Sustainable. It is essential to prove strong and continuing
relationships with customers and suppliers. Are sales and margins
assured to grow?
- Price expectation. The multiples of the “good old days” are not
that easy to find. Buyers want assured growth and the best deal for
a vendor will probably be based on a blend of current and next
year’s profits, rather than a forecast based on historic
Such deals are now the norm, requiring minimal bank support and
offering the aligned benefit of the “buyer pays for what he gets”
and the “seller gets paid for what he delivers”.
Where earn-outs or conditional consideration forms a part of a
deal, it is vital the vendor takes professional advice on the deal
n Preparation. The buyer’s due diligence process has never been
more searching and any “surprise” discovery will jeopardise the
price or even kill the deal. A vendor should undertake a full
review of financial, legal and commercial activities prior to
marketing the business.
What of the management buyout?
MBOs are being done but the vendor generally needs to accept a
discounted price and be prepared to wait for the proceeds over a
drawn out period. Bank funding is no longer available in the
proportions of six or seven years ago.
It should be an opportune time to sell the family company – but
you need to be prepared.
n Mike Norrie can be contacted by email at
email@example.com or phone 01732 400123