Some time ago ( after I built this blog ) I came across a company called BCMS who had had a lot of experience in selling companies. I read the information on their website, downloaded various other information and ordered a copy of their excellent book ” A refreshingly different approach to selling your business for maximum value “.
Later on I attended one of their excellent seminars. ( Very refreshing for Business Owners but a bit damning of normal accountants and lawyers !! )
In this presentation they highlighted the Top 10 reasons/motivations for company purchase ( in order of importance )
Source
http://www.bcmscorporate.com/ ( NB. worth downloading their book ” Selling your business for maximum value ” )
Recently I have been working with a number of clients who are selling their businesses or who are still building their businesses with a view to exiting and I have emphasized these reasons and motivations to them and advised them to emphasize these points in a sale and keep these points in mind as they build their businesses:
1. Client Base ( This is a dominant factor )
The quality of the customer base and repeatable and guaranteed business from those clients is a primary factor.
2. Potential for growth ( This is another dominant factor )
The potential for growth through the existing customer base and via new customers at home and abroad is also a primary factor.
3. Globalisation/regionalisation
We live in a globally connected world. Companies from India and China are looking to acquire in the U.K. and other countries. You must consider the applicability of your company to buyers from India, China and the U.S.A. at the very least. They will buy you because they have a global strategy or because they want to get into a particular region.
4. Ability to generate cash
Cash is King !! ( We didn’t need to say that eh ?? )
5. Development of products and services
If you have processes to ensure that you are ALWAYS at the forefront of your market this carries a high value.
6. Patents and IPR
If you have protected the patents and Intellectual Property Rights of your products and services this is valuable.
7. Operational and/or Financial synergies
You look at the operational and financial synergies and the costs that may be taken out and the additional profits and value that you bring to the purchaser.
8. Skilled workforce
The effort that you have put in to training and developing your workforce now comes to the fore.
9. Profit/ROI/multiples ( LAST )
Yes, amazingly, the very thing that the average accountant ( and probably some of the interested parties Financial Directors and advisers ) will value you on turns out not to be the thing that is held in most value – in fact it is the last !!
This is true now and will be true in n years time when your purchaser comes to do the same thing.
Companies will buy for strategic reasons NOT for multiples of profit or revenue.
When considering the value of your company consider it’s value to the potential purchaser 1 -3 years AFTER they have bought you.
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