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Why a seller should appoint M&A advisors by Andrew Robinson, Director of Finance

Date: Tue, 19 Jun, 2018

Why a seller should appoint M&A advisors by Andrew Robinson, Director of Finance

If you want to sell your business you may be daunted by the task, hesitate and continue to procrastinate until the value of your business is diminished. No need to worry! Achieving the best deal just requires following a straightforward process.

STEP 1 – Create a team with the skills to help you
If you are an owner considering the sale of your business, it may be that you are sceptical of the financial outlay of appointing a team of specialists to assist you. Perhaps you consider your existing advisor or accountant can help you? Maybe you are not sure of the value an advisor can bring to the table. Perhaps you have been put off by stories of business owners who appointed the wrong advisers.

What exactly are the benefits we are talking about? No one advisor can have all the skills necessary to assist you, so I thought it would be useful to suggest the ways in which a good team of advisors will provide value to you at this critical time.

1. Salesperson approach
First, the facts are clear that good team of business advisers can increase the price from the sale of your business by between 25% and 50%. Key will be a good salesperson who has relationships with a large network of potential buyers, but critically will have the sales experience to promote your business effectively and know when to close the deal. Often their fees are also determined on the sales price achieved.

2. Ensure your financial results reflect the business performance
Your key business drivers and the resulting profitability and growth potential will attract buyers. However, if your financial results and the business performance are not aligned it results in complex and time-consuming due diligence which wastes time and ensures a stressful time for all.

When promoting the business for sale the key business drivers need to be explained to potential buyers. Saying that ‘Our revenue was AED 25m last year and this year we will sell AED 35m’, may make good conversation over dinner, but in a business sale the buyer will want to know those key business drivers and how they will result in future revenue and profits. An advisor can help you develop models to link the key business drivers and the resulting financials.

3. Cash is king
A shrewd buyer will quickly discount improved revenue if it is not supported by increased cash flow. As well as collections from customers, also, focus on contract terms, cash outflows and on low performing departments. In some decisions, such as renegotiating contracts with key customers, closing departments, etc, a third-party advisors views can be useful as they can validate your decision-making and often the advisor can be used to make decisions in a prompt and diplomatic way.

4. Management team assessment
Owners who have run their business for years will know their people but are those key managers skilled enough to handle the current and future size/complexity of the business. Do they have the cultural flexibility to work with a new ownership team, perhaps internationally? An owner will often be too close to the management team to make unbiased judgments. Advisors can introduce more objective assessments processes to facilitate your decision-making.

5. Key processes
Are there key processes (such as stakeholder engagement, key customer relationships) which you are heavily involved in, which are not known to the management team and which will need additional skills to be recruited. An advisor can highlight these areas so that the processes are brought into shape prior to the sale.

6. Legal and regulatory advice
Bring in legal advisers early in the process so they can support any ongoing legal and regulatory matters, but more importantly support you in the sale process. You will not be familiar with many of the legal documents and processes that are required in a business sale. Experienced business transaction lawyers will be working for the buyer and it is important that you take the right advice to protect yourself.

7. Taxation
Whilst taxation in the Middle East may be less complex than other regions, it is important to consider the taxation implications of the change in ownership on the business and on your own personal tax situation. International investment tax advisors can also provide guidance for your tax and investment planning going forward.

8. Personal advisors
As a business owner, you have developed a network of advisors, either formal or informal, to which you have consulted over the years. It is important to tap this network during the sales process. They will have seen the growth of the business, heard about your successes and frustrations and can provide enormous help at this critical time.

9. How to choose advisors
The key attribute is experience in prior deals, so don’t just be drawn to the fast-talking consultant at the golf club! Check out the numbers and size of deals completed, the value they consider they have added, and the types of buyers in past transactions.

You will require a salesman for your business that has a strong network and is experienced in deal flow. Discipline around your financials and cash flow, restructuring both management and key process as well as legal and regulatory matters can all take time to manage and expert skills are required to assist you.

There is a cost of hiring an advisory team to deal with specific requirements but their cost pales into insignificance when compared to the cost of exiting unprepared. Don’t forget you are contemplating the largest deal you will ever make; therefore, you will want support from a team of advisors to position your most valuable asset in the most attractive way.

Talk to advisors early and benefit from:

  • Salesperson approach
  • Fresh perspective
  • Deal experience
  • Valuation insight
  • Specialist skills

Andrew Robinson, BBG Director Finance
Proprietor – Desert Owl Consultancy FZE