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Attracting Cash Buyers

When trying to sell your business, ensuring your business is as attractive as possible to active buyers within the marketplace is perhaps the most important step towards achieving a prompt and successful 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 these acquisitions are being facilitated.

At Kings, our recent market analysis has revealed an influx in activity from a variety of cash-rich, well-funded and credible 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 cash backed purchases.

UK Interest rates are at an unprecedented rate of just 0.1% and this 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 is attracting international investors eager to take advantage of 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 demographics of buyers your business is likely to appeal to, 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 transferred to them. Therefore, prior to placing the business onto the market it is strongly advised to ensure that your management team and key employees are capable of managing the business and driving the income, profitability and cashflow with minimal direct input from yourself. 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 or is on an upward trajectory. It is often counter-intuitive for a business owner to sell their business when it is at its most profitable but allowing an incoming owner to take over control of operations in this period will get you a far more generous return for your years of hard work. Examples of areas to focus on include having a broad base of long-term contracts in place; obtaining a full and ongoing pipeline of orders to as broad a spectrum of clients as possible; creating channels of repeat business, etc. It is important to mitigate the keys risks such as a key customer or contract terminating 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 will be delighted to assist you.

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