Sale of Commercial Cleaning and Facilities Management Company
A profitable commercial cleaning and facilities management company based in Central London. Established in 2011, the Company had built a strong high-end client base and a reputation for delivering tailored cleaning and maintenance solutions for their clients with consistency and quality.
The business owners had developed a robust portfolio of high-end clients with a presence across London. The client base - represented across a range of sectors - had a strong concentration across the financial services sector, including investment management firms, hedge funds and asset management companies in their client portfolio.
The Company delivered a comprehensive suite of professional property cleaning, maintenance and facilities management services for client premises across London, tailored to cater for individual client needs. The range of cleaning and facilities management services were provided in seven key areas: office cleaning, property maintenance, air conditioning/heating systems, recycling/waste collection services, confidential shredding services, plant/flower hire and IT cleaning expertise.
The Company benefitted from an efficient, compact team covering the core operational areas of the business. The operational structure of the business ensured that high standards were maintained through a well-defined supervisory regime, which included ongoing monitoring and training of cleaning operatives and regular inspection of client premises to ensure that the high standards the Company had come to be known for were met and exceeded.
This business had all the key traits of a successful business with a proven record for excellent service delivery, a highly satisfied client base and significant scope for growth.
Throughout our many years of experience selling scores of businesses, we have come to appreciate that every sale is unique and can often reveal unexpected challenges beneath the surface.
This particular sale involved 2 directors/shareholders with equal 50/50 shareholdings in the company, BUT no formal agreement between them to govern what would happen in the event of one director deciding to sell the business.
It became clear during our initial meeting with one of the directors (Director-A) that his co-director had no knowledge of his intention to sell the business. Indeed, he requested our advice on how to broach the subject with his business partner, which we were happy to provide.
All the same, this presented a significant challenge in terms of the sale proceeding. We were required to address the key questions as to whether the lack of communication between the two directors would obstruct the sale and the matter of whether Director-B was amenable to the sale taking place at all.
Bringing Director-B on board with an agreed way forward was a matter of priority. It was imperative to determine how to deal with the Director-B’s 50% shareholding in the business, given that a potential acquirer would ideally wish to purchase 100% of a business, as opposed to half of it.
We broached the subject of Director-A wishing to exit the business and focus on other unrelated activities.
The option of Director-B buying out Director-A was discussed at length, but eventually the directors agreed to proceed with marketing 100% of the company for sale, in order to assess the open market value of the business.
As always, we receive a lot of interest in commercial cleaning and facilities management businesses, from buyers in this sector who are registered with us. Within two months we had over 50 expressions of interest and a lot of good feedback from the market on the valuation.
With the initial offers we discussed with prospective buyers, the deal could easily have gone either way – either a full sale to a third party, or an inter-director buy-out. In the end, the directors agreed for B to buy A’s 50% shareholding, and the transaction was concluded a month later.
The result of the deal meant that Director-A was able to exit the business with a clean break – no need for a lengthy handover – and be relieved of the responsibility of co-owning a sizeable business. For Director-B, this has allowed her to gain full control of how the business is run and to be rewarded with 100% of the future profits.
Thankfully both parties are now happy and satisfied.
A couple of significant key lessons stand out for companies with multiple owners as a result of this sale:
- Communication between all parties is important at every stage. All shareholders must be on board and involved directly in the sale process, particularly when the shares of the business are divided between them on a 50/50 basis. If there is a breakdown in communications, seek help and mediation straight away. There is a key role for a good business broker here.
- It is important for all Directors with a stake in the business to have a formal Shareholders Agreement between them. This agreement needs to address - among other things - how the company is run and managed, what happens if one director wishes to leave the business and ultimately what happens in the event of the business being sold.
The company was marketed in January 2020 and the transaction was completed mid April 2020. The sale process was managed and negotiated throughout by our Business Sales and Acquisitions Consultant, Derick Humphrey.
SOLD - April 2020