Author: Rupert Trevelyan

I have seen deals where a company looks like a near-perfect match for buyers, but they fail in the due diligence process, which will concern all potential sellers. The solution is prepare and make sure your deal is not scuppered at the last moment.
Some of the issues that have come up are:
• Bank and intra company loans that need paying off
• Payroll issues e.g. not accruing sufficient holiday pay for contract workers
• Insufficient working capital / or disagreement about a fair level of working capital to be left in the business
• Concern about the viability of some revenue streams leading to buyers demanding punitive warranties
• Not having management information in place, leading to a large number of questions
• Sellers taking questions as personal criticism when they are legitimate commercial considerations for a buyer to understand when purchasing a business.
If you want to sell your business it is worth putting a plan in place which could be implemented over 1 to 5 years to put you in a position to get the best value when you sell. It should include:
• A viable business plan that shows growth potential.
• That your business generates enough profitable cash to satisfy the buyer (who may well by having to satisfy investor and lender criteria).
• Management and staffing plans.
• All documentation in place, including statutory and management financial information.
When you are busy running a business this may seem daunting, it needn’t be; Weybrook Business Brokers can work with you to prepare for selling and then when you are ready market the business, find a buyer and negotiate the sale.
Please contact us for an initial no-obligation conversation on Weybrook Business Brokers or call 07826 050690.

 

In the midst of lockdown 3, business owners may be reluctant to test the marketplace and consider selling their business. We are in contact with a number of investors with the capital to invest now, they are looking for cash generative businesses that have an assured customer base. Typically these are the criteria they are looking for in an acquisition:
• EBITDA: £0.5M – £5M
• Revenue: Predominantly recurring revenues
• Location: anywhere in the UK
• Sector: agnostic (but some are more specific)
• Asset Light & +15% EBITDA margins
• Particularly interested in situations where there might be a succession issue/retirement sale.
So if you would like to sell your business why not contact Rupert Trevelyan now for an initial no-obligation consultation. Email rupert@weybrookbusinessbrokers.com Call 07826 050690

The approval of the Pfizer COVID vaccine offers us all a ray of hope and allows us to start planning for business life to return to some form of normality in 2021. The pandemic has had an impact on all businesses and for many, it is been detrimental, particularly for those in hospitality, leisure, travel and retail. Sadly some businesses have ceased trading and others have had to significantly reduce their operations. It is now time to take stock and plan for the future and for some owners that may involve selling their company.

We are regularly in contact with prospective buyers who have funds in place to make acquisitions now. In the current economic climate, they are looking for proven turnover and cashflow with sufficient profitability to cover their investment. If your business has those elements in place then you are well placed. In many cases, owners will be unsure if their business is ready to go market. At Weybrook we have worked with a number of owners to find solutions that suit all the shareholders and facilitate future growth.

One client, a digital marketing agency contacted us when they had an unsolicited offer from a competitor; we valued the business and evaluated the offer which turned out to be less attractive than it first appeared. Our work allowed the owners to find a solution whereby one director exited, an existing senior member of staff is acquiring that director’s shareholding and will become a director and an external investor is taking a stake in the company which will provide providing ongoing security.

In another case a family-owned garage business faced a crossroads when one shareholder passed away, we worked with the owners to find a solution where one of the two remaining shareholders exited and the other one acquired his stake.

We had two interested parties who had approached an IT services company, but their offers fell short of the shareholder’s expectations. Working with him we put together a three-year plan which is designed to increase the value and saleability of the company to a level that will meet his expectations.

If you are considering selling your company why not contact us for an initial no-obligation evaluation, if your business is in a good position we can then market it, if however, there is some work to be done we can work with you to prepare it for sale.

Contact Rupert Trevelyan at rupert@weybrookbusinessbrokers.com or 07826 050690.

2020 has been a year like no other, many business owners will be thinking that there are no buyers out there at the moment, however, the reality is there are buyers out there. Sure there are those looking to acquire distressed companies, equally there are serious buyers looking for companies that are generating sufficient cashflow to cover/ service acquisition debt. Typically they are looking for businesses with a turnover between £1 and £5 million.

We have buyers looking in the following sectors:

: Manufacturing

: Domiciliary care

: Medical Equipment

: Hospital Cleaning sub-sectors

: Pharmaceuticals

: Medical Facilities

: Care homes

: Private Ambulances

: IT services

If you are considering selling your business please contact Rupert Trevelyan on 07826 050690 or rupert@weybrookbusinessbrokers.com for an initial no-obligation conversation.

https://www.weybrookbusinessbrokers.com/sell-my-business/

Thanks to WWF for this image

Sometimes we are privileged enough to work on a deal that can make a real difference. The sale of Predict Ability Limited is one of those, Chairman Bruce Menzies explains:

My name is Bruce Menzies. I am a civil engineer. I am Chairman, co-founder and director of Predict Ability Ltd (PAL). My fellow co-founders are Richard Clarke, a chartered chemical engineer, and Edward Coe, a financial software specialist. We founded PAL in 2015. Richard’s vision for PAL was to research and develop the worldwide price for carbon that was being called for by the UN, IMF, the World Bank and the IPCC (Intergovernmental Panel on Climate Change). We did this by assessing the loss and damage of insured and uninsured extreme weather events (hurricanes, flood, landslides, drought, forest fire…) that were attributable to the burning of fossil fuels. This price was expressed as dollars per tonne CO2, not simply tonnes CO2. This was a carbon tax-in-waiting for countries and corporations. December 2018 was a watershed. The UNFCC COP24 conference in Poland could not agree on who would do what about global warming. Meanwhile, in Paris the violent gilets Jaunesprotests showed citizens would not accept a carbon tax.

Additionally, the climate emergency was becoming obvious. Accordingly, we developed financial risk metrics for the impact of climate and climate change. We argued that corporations who embrace ESG (Environmental, Social Governance) and who practice Responsible Investing (like disinvestment in fossil fuels and investing in energy renewables) are more successful than those who do not – let the markets save the planet!

To deliver this vision required a senior partner with deep pockets. We were self-funding thus far and so owned the Intellectual Property outright. We turned to Weybrook Business Brokers Ltd to sell the business. Rupert Trevelyan immediately saw the intrinsic value in our IP. He grappled with our difficult science and came to understand it very well indeed. We started talks with a global financial services company. They are Global Corporate Financial Advisors with their HQ in the Netherlands and offices in London, Switzerland, Hong Kong and Canada. They have over 500 clients that are managing three trillion Euros. They were a natural match with PAL, having set up a Climate and ESG Solutions group that they wished to expand. On September 30th, 2019, PAL merged with the company., with the pre-merger talks overseen by Rupert. On November 1st, Richard and Edward started working for the new joint venture. – a very successful outcome for all concerned.

Dr Bruce Menzies
Chartered Engineer
Chairman, Predict Ability Ltd (PAL)

If you want Weybrook to help sell you business click on this link

https://uk.businessesforsale.com/uk/search/businesses-for-sale/articles/find-out-how-to-value-a-business

Selling your business?

If you want to sell a car or house, it is much more likely to sell if it is in good working order and looks the part. It also has to be on the market at a realistic price to attract appropriate interest and buyers. The same applies to selling a business.

All too often when I sit down with owners they believe their businesses are ready to list for immediate marketing. However, the reality is that if they had put measures in place over a period time prior to listing they would be in a much stronger position. Recently, I met with an owner who wants to sell a very profitable business. Turnover and profit have doubled in the last 9 months on the back of a new contract, which looks fantastic. After a bit of unpicking, a picture emerged of significant fluctuations in turnover and profit over the last few years based on contracts won and lost. In addition, the business has a high dependence on the owner and his business development skills. If the current owner walked away a potential buyer would be taking a substantial risk. On the one hand, it could flourish, but on the other, the contracts may not renew and the business could fall away.

If you are planning to sell your business you need to make a plan which might take several years to enact. Many entrepreneurs are skilled at growing and running their businesses but need guidance to put in place their exit plan, which is why Weybrook Business Brokers offers support for owners who are preparing their businesses for sale. https://www.weybrookbusinessbrokers.com/preparing-your-business-for-sale/

Here is a checklist for preparing your business for sale:
1. Why do you want to sell?
Make sure you know why you want to sell and what you will do once you sell.

2. Get your Finances in order
Buyers want good records of business performance (at least 3 years trading accounts) but you will need to be in a position to convince them that their acquisition will deliver profitable growth going forward. Plausible forecasts and business plans will provide buyers with the necessary confidence to purchase your business.

3. Make sure your business is fit to sell
To make your business attractive to buyers it must be in a position to transfer effectively to new owners:
• Strong second-tier management team in place capable of running the key elements of the business once you have exited
• Key supplier and customer agreements secured
• Shareholder agreement (of the sale)
• Evidence of sustainable profitable growth
• Any legal issues resolved
• All paperwork up to date and in place (contracts, agreements, leases, trademarks, employee contracts and benefits).
• It may be necessary to put a 1-5 year plan in place to ensure your business is fit to sell.

4 Decide how you are going to sell.
Selling a business is time-consuming and complicated. This could easily divert you from running it, which might lead to a decline in performance driving down the value and making it less attractive to buyers. Our advice is to assemble a team of professionals to help you market the business. This team should include: your accountant and or finance director; a broker to market your business and a good commercial lawyer to tie up the contractual issues.

It is critical that during the sales process you focus on business as usual and let the broker find a buyer.

We hope this article was helpful. If you would like help putting together a plan to ensure your business is fit to sell, we have a number of packages to help you produce a plan https://www.weybrookbusinessbrokers.com/preparing-your-business-for-sale/? We can also act as your broker https://www.weybrookbusinessbrokers.com/sell-my-business/

It is summertime, the sun is shining and the grass has green lushness to it………. everything is great…. but you are frustrated in your career, you may want to consider buying a business. If you know what sector you are targetting that is great news, start the search now.

For many buyers targeting a sector doesn’t come naturally, so one approach is to find a “lifestyle business” that can become a way of life. At Weybrook Business Brokers we have a variety of businesses on sale at any one time, there are three, in particular, that may be of interest to lifestyle buyers.

Firstly we all know mental health and well being are coming into focus in all walks of life and not a moment too soon. If you are active and keen on events businesses, we have an exiting wellbeing company that combines exercise and healthy eating. See the link
https://www.weybrookbusinessbrokers.com/exciting-wellbeing-company-which-combines-healthy-eating-and-exercise/

For those who want to sail off into the sunset and have sailing in their blood, we have a leading boat brokerage for sale. Find out more https://www.weybrookbusinessbrokers.com/leading-boat-brokerage-for-sale/

If you are practical and can handle basic plumbing and electrics why not consider taking on an irrigation contractor (domestic and commercial) whose like for like sales has grown more than 100% in q1 this year. See https//www.weybrookbusinessbrokers.com/domestic-and-commercial-irrigation-business-:2/

If you want to know more about these businesses or any business we are selling call Rupert Trevelyan on 07826 050690 or email
rupert@weybrookbusinessbrokers.com

In August 2018 Weybrook Business Brokers conducted research with business buyers to determine how they value businesses, we haven’t updated the research but the findings remain intact in mid-2019.

There is an old cliché that states that;” your business is worth what a buyer is prepared to pay for it”, whilst this is true, most sellers need a realistic valuation range before making a decision to put their business on the market.

A common mistake is overvaluing a business and therefore deterring potential buyers. If the buyer is going to the financial markets to borrow money to fund an acquisition, then the business must generate sufficient profit top service that debt and give a return on the investment on top.

Commonly we see offers staged over a number of years where the buyer uses the cash generated buy the vendor at agreed timescales. These deals are not popular with sellers but in a market where financing is tough, sometimes they are the only deals around.

The message is clear – profit is a key driver of positive valuation, so if you want to sell your business at a  good price, being able to demonstrate a trend for profitable growth is a key priority.

Our 2018 findings are shared below.

Valuation model

Two-thirds of respondents use a multiple of EBITDA (earnings before interest, tax depreciation and amortisation) a quarter use a multiple of PE (price earnings ratio) and the remainder use DCF (discounted cash flow) as their valuation models. A minority of buyers see tax as a legitimate cost and therefore use PE as their valuation tool.

Valuation multiple by sector

The mean valuation multiple currently being paid by sector is shown below:

The highest multiples are being paid in the Digital / IT sectors with the lowest in Food/ Events / Hospitality but buyers do point to future value/cash flow being the key driver of how high the multiple is. The multiples paid by valuers using PE as a valuation tool were up to 1 point higher than those used for EBITDA. The multiple for “other sectors” came to 4.

Valuation multiple by profitability / EBITDA

The trend for higher multiples being paid for more profitable businesses is born out by the mean scores below:

Buyers will typically be happy to pay more for companies with real profit growth prospects.

How much will buyers pay on completion of the sale?

The answer here varies between 0 and 80%, with the mean score being 49%. This is not what most sellers want to hear, as earn outs have a bad press, with the fear being that new owners will manipulate future profitability in their favour. However, the research suggests that sellers will have to be realistic.

How long will the staged completion payments take?

With only half the fee being paid on completion, the full amount is likely to be paid anywhere between 1 and 4 years after completion.
• 25% will complete after 1 year
• 25% will complete after 2 years
• 37.5% will complete after 3 years
• The remainder are likely to complete within 4 years

2019 trends observed

In 2019 we have observed a number of buyers who offering a multiple of three to four times net profit (+ cash on some occasions ) as a valuation tool.

So what are the conclusions?

The majority of buyers use a multiple of EBITDA to value a business they are looking to purchase. The multiples do vary a little by sector and will increase for businesses that generate higher profit levels. The multiples typically start at 2.75 for businesses generating an EBITDA less than £250k and rise to 6 for businesses generating over £10m. This research confirms that buyers are currently paying conservative prices in the current market. The majority of offers coming in at the moment are for multiples under 3 times EBITDA.

The article was updated in May 2019 and the research was conducted in August 2018 and the survey was sent to over 50 regular business buyers. The response rate gives us the confidence to publish the results, showing a good snapshot of current business buyer intentions, but the survey cannot be said to be a definitive UK Market survey.