Can a debt solution fund your growth?
Should you sell to trade or to private equity?
Is listing right for you?
This is part three of our three-part series, full of practical tips if you’re thinking of selling your business now, or at some point in the future.
WHAT ARE YOUR STRATEGIC OPTIONS?
RETAIN AND GROW:
The opportunity to grow through acquisition or investing through strategic Capex (capital expenditure), using debt capital available in the market.
Why? You can maintain control of your business. The current debt market and emergence of credit funds can meet your needs, including taking cash out of the business. Tax planning is important.
PRIVATE EQUITY INVESTMENT:
Receiving investment from a Private Equity house, working with a partner who’s focused on growing the capital value of your business for their ultimate exit typically in 3-5 years’ time.
Why? It provides an opportunity to de-risk and benefit from their expertise, contacts and financial firepower.
You will now be sitting with a partner around the board table who will ask questions, request information and contribute ideas. They will also support you with finance and intellectual capital.
What are they looking for?
- Strong quality of management team i.e. people who can continue to grow the business.
- Differentiated offering, i.e. unique skills in the market, something niche, or possibly a market leader.
The right PE house for you?
- Are you picking someone in the right sector – do they fully understand the sector and what your business does?
- Are they the right size? Do they have enough capital to help you grow / fund acquisitions?
- Chemistry – do they understand you and what you want? Forming a key relationship is fundamental.
SALE TO TRADE:
Selling to a corporate buyer or a competitor.
Why? Due to synergies available both from a revenue perspective and operationally, they can often pay the highest price. However, PE houses may still outbid trade buyers if there’s a particularly strong appetite for the sector.
- Who will pay a strategic premium?
- Who would best fit with your company?
- Could you work for the new owner if required?
Taking a business to market and listing it. The most relevant listing for mid-market companies is the AIM market.
Why? The kudos and legacy associated with shares being publicly traded.
- The AIM market is susceptible to volatility through sentiment; a big event unrelated to your company may happen and cause market appetite to drop considerably.
- Costs of listing relative to capital raised can be expensive.
- Enhanced corporate governance, regulation and public scrutiny.
WHAT’S HOT RIGHT NOW?
These are businesses which service fundamental parts of the UK economy, and are using technology well to scale them and manage costs effectively. Typically, they achieve high multiples.
This sector is driven by factors such as the ageing population and the rising cost of quality care. There is, therefore, significant investment into products to sustain living, or services surrounding this. Additionally, multiples can be large (potentially double digits) for businesses with visibility of their revenue. When there is a downturn expected, people will look for downside protection. If there are visible contracts or income, then it will potentially command a higher multiple than those which are project based.
Who are the panel?
Krista Fox – Over 25 years’ Transaction Tax experience.
Andy Parker – Over 25 years’ Corporate Finance experience.
Paul Ambrose – Debt Advisory specialist.
Ben Rookes (Host) – Over 14 years’ Corporate Finance experience.
To watch the full webinar, click here.