insights
A business sale, for many, is a process that will only be undertaken once. There are a multitude of considerations in how to sell a business, but planning and timescales to completion are key.
Effective planning is vital to managing an efficient, successful sales process and can help to identify the factors that could affect both the speed of the transaction and the viability of a sale process.
Some timing factors are within your control as the seller, and some are not, such as the economic environment, regulations or the buyer’s objectives.
Over the last 12 months, the UK has seen economic volatility largely driven by increase interest rates, political turmoil, and ill-received budget announcements. However, while volatility often leads to uncertainty, it can also present opportunities for those looking to sell.
Foreign investment has increased following the weakening of the Great British Pound with overseas investors able to acquire UK assets at relatively low prices compared to historic levels. There is potentially a short window of opportunity for overseas investors to benefit from this position, providing stimulus for streamline processes and defending transaction values.
The current UK tax regime and annual budgets are also considerations for a seller. The existing UK capital gains tax environment is at its most benign level for decades. Annual budgets add uncertainty as the conditions may not remain unchanged for much longer. Therefore, for sellers, it can be beneficial to complete before the next budget to ensure you benefit from the current rules.
Macro-Economic factors are outside of the control of both the buyers and sellers. M&A activity is largely linked to the confidence of each party and the performance of the target company during difficult times.
The company being sold, and the shareholders agreements in place, may require additional regulatory considerations before a sale can be completed.
For instance, if a company operates as part of the supply chain for any Ministry of Defence contractor or supplier, then government clearance for the sale is required. This can be notoriously slow, as the government will have a response deadline to which they can operate and will usually utilise all time available. Planning for this early on will ensure that as soon as an offer is agreed the lawyers can begin to request clearance as soon as possible.
Legal complexities such as ownership or preference rights to any of the share issued may cause delays if not considered before beginning the sale process. Shareholders alignment and maintaining a common goal from the outset is helpful in maintaining the pace of a transaction.
Both parties can influence the speed of a transaction and the reasons for influencing the timings vary.
For example, a listed buyer may wish to announce a strategic acquisition within a certain timeframe while other buyers prefer to take their time, perform pre-offer diligence, and monitor the performance carefully before committing to an offer.
On the other hand, a seller may wish for a quick sale to maximise gains if there has been strong recent performance, or limit losses if the business has performed below expectation. Personal drivers such as ill health, retirement and bereavement can also force a quick sale.
Buyers may look to influence timescales during negotiations for their own benefit. However, a seller, and their advisers may speak to multiple interested parties and use this to control the pace and maintain momentum of the transaction.
Ideally, the seller’s and prospective buyer’s timelines will be aligned from the outset, and both will work together to reach the desired outcome. Typically, for Small to Medium-sizes Enterprises (SME’s), a reasonable expectation for the transaction timeframe is 9 to 15 months.
By understanding the factors that can impact the speed of a transaction, and by seeking advice of experienced advisers, avoidable delays can be removed, allowing your business sale to be completed smoothly and efficiently.
If you are seeking support with selling your business and want to discuss an exit strategy or are seeking other guidance and advice, arrange a call with us today and find out how we can help.