According to the ONS the value of mergers and acquisitions in the UK by foreign companies (inward M&A) reached a record high during 2016 of £187.4 billion, which was dominated by a small number of very-high-value deals , this is the highest value since 2011. At the top end British Business is clearly attractive to international buyers. It is less easy to discern the picture for small private businesses but the Federation of Small Businesses estimate that there were 5.5 million privately held businesses in the UK in 2016, that was an increase of 97000 on 2015 and 2 million on 2000. Privately held businesses are key to the growth of the UK economy going forward, we need to encourage and facilitate growth in this sector.
Many of us want to run our own business and one way to achieve that is to buy a business. I recently read an article from the US claiming that 50% of US adults want to run their own business, I suspect the figure would be similar in the UK. The same article also quoted a 90% drop out rate in from those individuals/potential buyers beginning a search to buy a business and then going on to make a transaction. It is also clear many businesses that are up for sale never actually sell.
Having been through the process of trying to buy companies I am aware that many sellers and buyers face a bewildering fog without the correct information or advisers.
Why?
Most people have never bought or sold a business before! Hence, they enter the process completely unprepared. No matter how successful you have been in running a business and in your career, it is unlikey anything you have done so far will have prepared you for the process. You will face potential life-altering questions, situations, and decisions during the various stages of the buying process. Not having the key knowledge to make these decisions, many buyers drop out.
To avoid this pitfall requires research and education, buyers and sellers need to invest time in building their knowledge base, you are talking about life changing transactions here, it really is worth the effort.
Choosing the right business is difficult, the same goes for the right buyer! It is a massive decision for those involved. Buyers will have scoured the listings and visited a number of sellers, yet still they may well be wrestling to match their strengths to the businesses they are looking at. Nobody wants to make the wrong decision particularly when it is such a big one. It’s tough to knuckle down, but spending time honing down your target market really will be time well spent.
For sellers, you will want to get the best value for your business and to do that you need to maintain an upward trajectory in revenues. Vetting potential buyers and determining the ones with adequate funding is time consuming and can be overwhelming if you do not have adequate resources and appropriate advisers to do it, which leads to the next point.
Expert advice can be critical to getting a deal over the line. Business brokers are remunerated by the seller and will ensure that the seller gets support, but in order to facilitate sales a good broker will work with and help prepare buyers to make a purchase, so that they can match them with their sellers.
Friends and family can provide good moral support, but they rarely have the skills required to get a deal over the line. You will most likely need to engage an accountant/ finance expert and a lawyer, if funding is required financial advisers will be needed and in some cases consultants. This sounds expensive and there will be costs involved, but getting the right advisers will invariably be critical and good value for money.
In summary :
· If you going to buy or sell a business, you must put the time in to educate yourself about the process.
· To get the right deal, you need to find the right business or buyer.
· No matter how good you are; working the right professionals will increase the probability of getting a deal across the line.