When is the best time to sell a business?

Our Corporate Finance Partner, Steve Plaskitt, shares his advice on the best time to sell a business…

Mike Ashley announced this week that he is to put Newcastle United Football Club up for sale. Whilst this brings great relief to many fans (who hope a rich buyer will be able to spend to end the 48 year wait for a major trophy) it begs the question, ‘Why now?’

I may be in the minority of NUFC fans as I quite like and admire Mr Ashley.

Considerations before selling

Arguably a brilliant and astute businessman will have considered several factors before deciding to sell:

  • Newcastle United are back in the Premier League, whereas last season they were in a lower league
  • They have invested heavily in management and staff
  • The Premier League teams are flush with money from a recent TV deal
  • Their new sponsorship deal is opening up markets in the Far East
  • Global markets are still relatively buoyant to attract UK and overseas bidders

These, and similar thoughts, should be given to your own business.

Identifying internal and external factors

At Tait Walker Corporate Finance we often see great businesses that are not quite ready to sell. They typically need to consider internal and external factors before they are ready.

Identifying these factors early (which may be as much as 2-4 years) allows owners to plan how to address their issue to maximise their preparedness for sale, the likelihood of a deal completing and the ultimate value of the sale proceeds they will get.

Typical internal factors are:

  • Improving management information so that you have relevant data to assist the business in improving (and evidencing) its profit/cash and to identify niche areas of value for a potential buyer
  • Recruiting the right people at board level and other senior management positions to drive the business forward and remove any reliance on the vendor
  • Developing your own intellectual property or new products and services
  • Working more closely with your customers, establishing contractual and recurring revenue and looking at your markets for ways to drive sales and new opportunities.

Other external questions to consider are:

  • Is the market still active and are there consolidators/buyers out there for the next couple of years?
  • Is your company’s social media presence great and is it able to generate publicity so that buyers are aware of you?
  • Is a trade sale the most suitable route or would it be to sell to private equity, to a management buy out team or to a trust and retain much of the business within the family?
  • Why would you be more attractive than other similar companies?
  • Do you know how you would fit with your likely buyer’s plans?

Conclusion

Mr Ashley is also an expert at generating publicity, which in turn generates interest and sales in his business empire. Like the old adage, even bad publicity around ongoing allegations following a HM Revenue & Customs raid at Newcastle United is viewed by some as good publicity!

Similarly, when thinking of selling your business, you will need to take time to plan your own tax affairs and those of your company.

Finally, unlike Mr Ashley, you will probably not need to worry about how thousands of fans would prefer a new owner to take the business forward and end the wait for a major trophy that has lasted my lifetime.

Please feel free to contact Steve Plaskitt at Tait Walker to discuss your plans for your business.

Related Insight