City comment: Key points to successfully buy or sell your business in today’s market
Fri, 22 June 2012 | By Carl Swansbury, director of corporate finance, Ryecroft Glenton Corporate Finance
If you are thinking of buying or selling a recruitment business it pays to understand the factors at work in the market and to act accordingly. Here are some key pointers for a successful deal in today’s market.
See the market for what it is. Create a strategy that works in these economic circumstances to get the results you need. For example, by seizing the opportunity to focus on a different discipline within your sector, you could increase business, profits and the possibility of a successful sale.
Acquisition finance is challenging. It is pivotal to have an excellent business plan and flawless financial forecasts in place if you are planning to sell.
Management information is relied on by business advisers, funders and the incoming party. Make sure yours is up-to-date and well presented.
Deals are taking longer to complete. Acquisitions are becoming more reliant on due diligence, and funders and buyers are increasingly cautious. This means a longer process. The average length of an acquisition or disposal from inception to completion has grown from six to nine months a year or two ago, to nine to 12 months in 2012.
Timing is key. Planning for an exit has to begin as far in advance as possible – often around two years before you intend to leave the business. We may not be able to control the economy but we need to allow for the time it takes to raise acquisition finance and identify the best buyer possible.
Patience and resilience in abundance is required by all parties. Without these two qualities deals simply won’t happen. The corporate financier – and the recruitment business – have to be relentlessly focused to keep the deal moving forward.
Skilled, experienced management teams are more important than ever. We need to demonstrate that a vendor will have a strong management team in place to provide confidence and stability following the sale of the business.
Flexible management is necessary for a successful deal structure. We’re now seeing more earn-out and deferred structure elements than ever before as part of the transaction.
International investors and private equity houses are coming back into the market, which is providing a new dimension to many acquisitions.
Proactive planning and comprehensive due diligence have been key to the deals I’ve completed in recent months. Be positive, flexible, thorough and determined from the outset, and you will be in the best possible position to achieve the acquisition or disposal you want to make.
Carl Swansbury, director of corporate finance, Ryecroft Glenton Corporate Finance