Back to media page
Thinking of Selling your Business?
Securing a strategic premium
The goal of any sale process is to maximise shareholder value, both financial and non-financial. A successfully executed sale is best achieved by detailed research, planning, timely communication, a well-managed process and, most importantly, appointing an experienced sale advisor and planning well prior to the actual sales process.
The 10 steps in planning for a sale with a strategic premium:
- Pick a good, experienced advisory team
- Confirm motivations, objectives and desired outcomes with shareholders and management
- Undergo a data collection session with the advisory team to ensure they thoroughly understand the business
- Identify transaction issues
- Develop a transaction strategy
- Implement change where needed
- Position for a transaction
- Identify ’Natural Owners’ – those that benefit most from an acquisition
- Track industry activity.
While each step is important, InterFinancial invests a significant amount of time understanding the seller’s desired outcome. The issues that need to be considered include:
- drivers (e.g. tax planning)
- expectations (e.g. price expectations)
- post transaction involvement and exposure to the business’s risk
- other personal matters (e.g. relatives, staff, clients and competitors).
It is also important to understand any limitations or constraints on the transaction process or outcome, including: no-go counterparties, asset exclusions or inclusions, minority stakes, and the level of post-sale interest or risk positions the seller is prepared to take (e.g. earn outs, property ownership and/or leases, warranties, and indemnities).
A second significant matter is that you need to understand who the right buyer is; ensure the goals and expectations of the seller align with the profile of the business and capital market expectations.
To secure a strategic premium when selling your business, you need an advisor that has sales experience with a range of investors and buyers, including financial investors, strategic investors, and Initial Public Offering (IPO) markets to enable them to identify the right buyer and best sales process.
| Financial Investors
|| Strategic Investors
|| Initial Public Offering
- View investment as strictly financial and, therefore, cash flows and growth potential are important.
- Generally do not take part in day-to-day operations of the business (i.e. are in board roles).
- Use net present value (NPV) and internal rate of return (IRR) as investment metrics and measures of investment-worthiness.
- Use leverage or debt to enhance returns.
- PE firms generally have a 3-5 year holding period before exiting investment through a trade sale or IPO.
- Strategic investors are generally less concerned with cash flows than financial investors.
- Earnings per share (EPS) accretion to the acquiring company (if listed) is an important investment criterion.
- Able to realise synergies and, therefore, could (theoretically) pay a higher price.
- Strategic investors may bring management capability and additional intellectual property (IP), marketing and distribution networks.
- Usually acquire with a view to hold for the long-term, unlike financial investors.
- ‘Going public’ via an IPO introduces public funds into the company. However, the costs of going public are considerable.
- The compliance, disclosure and regulatory regime can be onerous for some – as is life in the public eye.
- A public listed company has the capacity to tap into the equity capital markets for further capital if required.
- Provides a future liquidity option to founders or owners.
- ‘Going public’ may also assist in cementing the company’s brand and trademarks, as well as establishing a beachhead for overseas expansion.