E75 | Getting the Most When You Sell Your Life’s Work
If you’re looking to sell your business, then you will be wanting to get the most out of what is effectively the sale of your life’s worth. But how do you do that?
You’ll probably need to draw on the expertise of financial advisors, and today’s guest, Daniel Havercroft is a partner at Oakley Advisory, one of Europe’s leading independent corporate finance firms.
Daniel is focused mainly on origination and execution of M&A and fundraising mandates, and has considerable experience helping companies that operate in hosting, colocation and digital media/online sub-sectors. Having completed over 30 transactions in his time with Oakley, helping shareholders sell businesses, companies acquire competitors and private equity invest in new opportunities, Daniel is incredibly well-placed to talk all things selling a business.
When it comes to selling your business you want to drive your company’s valuation, and be able to look at your business from the eyes of the potential purchaser rather than through the eyes of the people running the business. Because in order to extract maximum value from the sale, you will probably need to change some aspects of your business. Daniel shares with us what those changes should be.
This is a fantastic conversation with Daniel, we hope you enjoy it as much as we did.
On today’s podcast:
- The benefits of being a sector specialist advisor
- When an entrepreneur should bring in an advisory firm in the sell cycle
- The KPIs you should be looking at prior to selling your company
- The impact of the management team on valuation
- Global trends and hot topics for 2020
- What to consider when appointing an advisor
How to Sell Your Business with Finance Advisor Daniel Havercroft
Since they started in 2007, Oakley Advisory have completed over 140 transactions with a total Enterprise Value (EV) greater than £5bn and have a retained TMT equity capital market client base of listed companies.
Oakley is a specialist corporate finance advisor. They provide M&A advice for businesses of all different sizes, helping entrepreneurs sell businesses which are worth less than £20 million in EV terms through to multi-billion EV transactions such as the sale of Telecity to Equinix a few years ago.
Which is why Daniel Havercroft is incredibly well placed to discuss how to extract maximum value from the sale of your business.
“We typically find that being appointed 18 months to two years before somebody is looking to sell, works best.”
KPIs
When you’re looking to sell your business, you want to maximise its value, and Daniel recommends that business owners start monitoring new KPIs within their business, which the buyer audience will expect to see.
And all companies have issues that need to be resolved prior to a sale, irrespective of how well they’re managed. There are some things that we all put off until tomorrow, and it’s those things that need to be addressed when you’re selling a business.
“It’s not time to actually do stuff. But it’s enough time once you’re actually monitoring your KPIs, to take advantage of some of the trends that you’re seeing from those KPIs, to put things right in your business, clean up certain issues that you might have in your business as well.”
So what KPIs should you be measuring? Of course, there are many different types of KPIs for different types of businesses, but common ones include:
- The nature of revenues, not just the division that they’re coming from
- Churn level to understand the nature of the churn
“Most companies monitor churn to a level, what they’re not doing is actually trying to understand the nature of the churn. Buyers can get a great deal of comfort from understanding that there’s an element of your churn, which is the stuff that you can’t do a great deal about, involuntary type churn.”
Importance of good management
What’s the impact of the management team on a valuation?
“If management can’t tell a cohesive story when they’re in front of the buyers, then you will not get the valuation for the business that you expect or hope… management has a very big impact on valuation.”
Choosing an advisor
If you run a business thinking about appointing an advisor, what should you be looking for – what things should your company be thinking when appointing an advisor?
- Choose someone who specialises in your sector. “Frankly, it’s really difficult selling a business that you don’t understand that well. Not only do you not understand the business particularly well, but you can’t really understand who the real buyers are. Not only that, what story, what are the key points that you need to sell to a buyer audience is so difficult to sell when you don’t truly understand the business.”
- The experience your particular advisor has in your relevant sub-sector.
- There needs to be a personality fit with your advisor. “You might work together for 18 months, two years, you know, that’s a long time to be stuck with somebody. And if you can’t get on with them, it’s going to be a pretty painful journey.”
- Make sure that the person who comes to sell you the vision of that great advisory service is the person who’s actually going to be there in front of you when you’re working together.
- There needs to be a sense of trust because the advisor is going to be advising you on one of the most important decisions in your life. And you need to get the sense that this is a person who’s going to be batting for you, that they’re going to have your best interests at heart.