Business Exit via Trade Sale – Misconceptions

Raising Finance

Business Exit via Trade Sale – Misconceptions

This is the first in a mini series of newsletters on business succession, addressing the trade sale route, buyouts by managers, and transfer to employee ownership (the so-called John Lewis model).  Business owners can often put off thinking about business succession, however we are all mortal and there are many horror stories of businesses left to widows (or widowers) who may not be best equipped to lead the business.

The Idea

Selling your business to another business, otherwise known as a Trade Sale, is probably the default view on how to best realise the value you have built up in your business.  The Trade Sale may well be the best alternative for you and, as Virtual Finance Directors, we are often asked to project manage the business sale process, including the detailed due diligence process.  However, what are the typical misconceptions about Trade Sales?

The Game Plan

Here are our top Trade Sale misconceptions:
1.    that the best valuation will be paid by a competitor
2.    The value first agreed upon will be the amount you receive
3.    That all consideration will be paid on completion
4.    That most deals progress to successful completion
5.    That the business owner won’t become distracted and the business suffer
6.    That there is no need for a plan B
7.    That you don’t need to prepare for the due diligence process
8.    That once the deal is done you will still be able to influence decisions.
9.    That there won’t be a 11th hour hitch
10.    That you won’t have any risk or liabilities post sale.

The End Result

Securing a good Trade sale all depends on how good the strategic fit is, the financial return and even cultural fit.  As Virtual Finance Directors, we often act as sounding boards for business owners seeking to balance all their objectives when it comes to planning a successful business exit.  Here is a recent client quote:

“Our Virtual Finance Director and Virtual Financial Controller team brought a further tier of professionalism to our accounting processes. Our VFD and VFC helped considerably in working through the due diligence requests and preparing documents with the Auditors and our Accountants corporate finance team. His previous experience was very helpful in achieving both our price objective of £2.4m and meeting the completion date before the end of the year, a 6 week deal timeframe.”  Sebastian – Business Owner

Please contact us if you would like an informal chat about planning your successful business exit.  Alternatively you could see our client testimonials or read our case studies.

Kind Regards

James Shand