Planning to retire - Best place to sell my UK business

MankyVegSoup

I sold a small business 9 years ago. Much lower turnover than yours and totally different type of business (ecommerce). But some of the same principles will apply in that prospective buyers will be looking at profitability above all. So now is the time to trim any fat and get your bottom line as good as you can.

I used an agent and although it wasn't 100% smooth, I don't regret it. For your size I would definitely talk to a few. At the very least you'll pick up some good tips re selling.

Marcon

garytryingtosave123 wrote: »

A manufacturing business, Turnover £5m, sell around £2-3m.

I am attached but recently became a grandfather and want to spend more time with family.

Turnover is no guide to profitability. What were your gross/net profits on that? How key are you to the business? The fact that you own property is only as asset if someone wants the type of building in the condition/location it is in.

Maybe a chat with your accountant or lawyer is the starting point, not least to check if your selling price is anything like sensible in the current market.

Spreadsheetman

I was part of a substantial business sale a few years back so I have experience in the process. I can't say too much about it, but my 4 bits of advice would be:

1) build a strong management team that can run the business independent of the founder(s).

2) get assistance from company sale specialists employed on a largely contingent fee basis so their aims are aligned completely with yours i.e. to achive a sale for as much as possible. No sale = minimal fee. Listen to them re. what your company is really worth and how to maximise value.

3) Don't underestimate the effort & cost required - the amount of information that the due-dilligence process will call for is huge and wide-ranging. Providing this will probably be a full-time job throughout the process and is going to run up a lot of accountant time. (plus every potential buyer will want slightly different info in a different format thus multiplying the effort)

4) Expect to give warranties post-sale for the accuracy of information, historic tax liability etc. Also expect some kind of time based tie-in before you receive the full sale value, possibly with company performance targets that must be met.

Good luck with the process though, it can be very rewarding if successful.

warby68

Seen a lot of business sales and attempted ones over the years in my work.

MBO/MBI's often need to be structured to reduce the upfront capital costs to the buyers who often simply can't raise the £2-3m you're looking for. Common things are to strip the property asset out - new entity pays rent. or vendor loans - the new owners repay you over time.

However with those earnings. not sure I'd want to give them up over having an MD or part selling. That's a heck of an earnings profile unless you have massive debt or ongoing capital investment requirements larger than the norm.

Exits are often planned over considerable timescales, including recruitment and establishment of successors if none of the current team seem interested or suitable.

The easiest ( if not always the most lucrative) seem to be to competitors or bigger players and particularly overseas ones who want a 'ready made' entry to UK markets. That said, manufacturing hasn't been the strongest sector for this although your profits suggest you may be an exception

MoneySavingUser

Marcon wrote: »

Maybe a chat with your accountant or lawyer is the starting point, not least to check if your selling price is anything like sensible in the current market.

I suggest speaking to a corporate finance accountant.


Does your current accounting firm have a corporate finance partner? If not have a look at some of the medium sized regional firms of accountants in your area (where are you based?). They will have experience of selling businesses such as yours and usually have a list of people who are looking to buy and can try to match you up/market the business.


A broker may be needed but that will come at a later stage.


Alternatively, you could bring in a new management team/MD to run the business and keep your shares. Then over time you could use a company share scheme to pass on shares to employees/management if they meet certain targets etc. This makes it more affordable for them.


Once some shares have been passed on, if the company has cash then it could buy back the rest of your shares if you wanted a clean break from the business.

atush

Thrugelmir wrote: »

Thought of employing a Managing Director?

Good idea- as would have been to gift shares in the comany in lieu of bonuses for a senior staffer or 2 over the years. This can ease a management buy out,

PaulCooper

OK, here's my thoughts for what it is worth.
A manufacturing business is in effect a 'service' business & should be worth 2-3 times earnings. So your valuation is probably somewhere near (assets would be on top of this--- not sure from your original post if the company owns the premises?)
You need to split in your own mind, Ownership, Directorship & Employee
Firstly find a Non Executive director that has experience from within manufacturing & the sale of a business, it might cost you 15-20k pa, but it will be worth it.
Secondly look for a senior manager that wants equity & wants to be MD. The right person should be able to lay their hands on 50k for say 10% of the business. Structure a buy out, by the new person & hopefully other members of staff over 2-3 years, so that they then own 50% of the business

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It should be an attractive investment if you continue making 1.2 million EBITDA
Over the 2-3 years your time as an employee would reduce to zero quite quickly, but as a director maybe retaining 1 day a week.
After 2-3 years the MD should be making enough in dividends to buy the other 50% of the business from you (if of course you wish to sell the remaining shares)
I would advise against going to the people that advertise to sell your business, most of them will be Venture Capitalists that will asset strip the business, leaving it saddled with large debts and probably 10 years down the line going bust

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I know that sounds a bit jaundiced, but I've seen it happen many times to unsuspecting manufacturing businesses such as I guess yours is
That's the real 'bones' of my advice
Regards
Paul