Thu 13th October 2016
“How long will it take to sell my business?” is a question we are frequently asked by prospective clients. Our own metrics are typically 70% to 80% of our client’s business sell within 12 months from retaining us to completing the sale and 30% of these complete within 6 months. However, the time it takes does depend on the business in question: its sector, type of buyer and availability of information will affect the timing.
Which sectors sell quickly?
Typically it is sectors which have a large number of players but where it is difficult to grow organically as clients rarely switch from one supplier to another. Businesses we have sold within 6 months include IT, telecoms, facilities management and commercial cleaning, and accountancy firms. These sectors are constantly regrouping and consolidating; buyers are normally trade buyers with cash reserves looking to grow their client base with service contracts which bring in regular recurring revenue.
Businesses we have sold within 6 months also include a number of precision engineering businesses. Whilst recurring service contracts are not the norm here, customers of engineering businesses tend to have constant demand and are loyal to, and dependent on, suppliers who deliver quality precision made components on time.
Which buyers act quickly?
The best type of buyer for a smooth sale process is one with cash reserves in place for the size of the deal. Buyers who need to raise bank loan finance will have to convince the bank and their management that the deal is right, and due diligence will often need to be done by both the bank and the buyer’s management. Experienced trade buyers will be able to make their own decisions quickly and take a pragmatic approach to due diligence focusing on the real business issues and asking relevant questions. Larger institutional buyers will tend to use larger accountancy firms to conduct more forensic due diligence which can be more time consuming.
Availability of information
The availability of up to date management information is key to a smooth sale. Having management accounts for the latest month each month and being able to respond to detail questions quickly will not only save time but will also give the buyer confidence that the business is well run. If the information a buyer needs to know is clearly laid out in the Information Memorandum, the buyer will be able to make a clear decision about your business and whether it is right for them. When it comes to due diligence, being prepared with all your contracts (clients, employees and suppliers) and articles of association to hand and up to date will avoid delays in the transaction process as well as reduce your legal costs.
Take time to find the right buyer – but keep the momentum
It can take some time to find the right buyer for your business in order to secure the best deal value and structure. And it is important that your broker and M&A advisor takes the time to turn over every stone to find this buyer. However, keeping the momentum in a transaction is key to completing your sale successfully. Events happen, situations and outlooks change whether on the buyer’s side or yours. Having an experienced business broker to manage the process from start to finish will ensure a successfully and timely sale.