Attracting Cash Buyers
31st July 2020
When trying to sell your business, ensuring your business is as attractive as possible to active buyers within the market is perhaps the most important step towards achieving a prompt completion of sale. However, of almost equal importance is to first attain an understanding of the key driving forces behind acquisitions within the industry, and by what means are these acquisitions being facilitated.
At Kings Commercial, our recent market analysis has revealed an influx in activity from cash-rich buyers seeking quality acquisition targets. Due to the turbulent market conditions presented in the wake of the covid-19 pandemic, we have witnessed an increase in investors and strategic buyers working towards achieving swift completions on largely cash backed purchases.
The unprecedently low interest rate of 0.1% currently available within the UK has given rise to a flood of low-level loan-to-value mortgages. Pre-existing industry operators and aspiring market entrants have been able to repurpose their cash reserves to secure the additional funding they require to fund their acquisition strategies, whilst enjoying all time low interest costs. In addition, the retention of a historically weak British sterling has accommodated international investors to exploit the UK’s prime investment conditions; we have noted a spike in investors from the Middle East looking to obtain a foothold in the UK through acquisition.
Once you have formulated an understanding of which demographic of buyers your business is likely to attract, how do you get them interested?
First and foremost, ensure that the business will be able to maintain its level of profitability and growth without your direct involvement. A potential buyer will want to be confident that the business will continue to thrive after the sale has completed and ownership has been assigned to them. Therefore, prior to placing the business onto the market it is strongly advised to train your management team or a selection of key employees to independently drive cash flow into the business without any of your own input. Providing evidence of this will not only attract an increased number of buyers to your business but allow you to command a premium in your asking price.
Another key point is to place the business onto the market when it is performing at its optimum. It is often counter-intuitive for a business owner to seek a divorce from their business when it is at its most profitable, but allowing an incoming owner to takeover control of operations in this period will net you a far more generous return for your years of hard work. Areas for this to cover include having an assortment of long-term contracts in place, as well as obtaining a full pipeline of orders to a broad variety of clientele; it is important to mitigate the risk of a key customer leaving post-transaction by diversifying your network of clients.
If you are considering the sale of your business and would like to learn more about your market exit options, the experienced team at Kings Commercial will be delighted to assist you.