18 May, 2022 - 18:47

So why sell?

The wheels keep turning in the world of corporate finance and most advisers, like us at Ashcroft, are still reporting heady times, writes Tom Gallop, Head of Corporate Finance, Ashcroft Partnership LLP.

Private equity funds remain ready to be deployed, overseas acquirers are eyeing the UK for prize assets and Cambridge remains a hotbed of ideas and innovation.

In the first two years of Ashcroft and the more than 25 years of our advisory careers prior to that, our team has completed a variety of transactions including management buyouts, private equity fundraisings, acquisitions, and, of course, numerous company sales. 

Shape and size

The company disposals have come in all shapes and sizes, from deals valued at £1 million to some over £100m, from precision engineers and vets to cyber security and recruitment.

Some have substantial factories and cutting-edge plant and equipment; others have no physical presence at all, just a collection of consultants working remotely across the globe. 

Most have been profitable, although one of our largest ever deals was a loss-making software company. In recent weeks, we successfully completed the sale of a Newmarket based and globally acclaimed engineering firm, with the sale of C4 carbides to TTI Group.  But what has motivated all these business owners to sell? 

Lifechanging timing and choices

For some, it is genuine retirement.  I’ve had a few clients selling in their 70s, but then many more in their 30s and 40s; 45 is probably about average.  

Some entrepreneurs just get itchy feet and are eager to explore new opportunities; others have always had an eye on the immediate lump sum generated through a sale and have planned an early exit from the beginning.

For many, it’s about de-risking: their business might be worth £10m, but at home they have a mortgage, school fees and mouths to feed, and a distinct lack of liquidity.

A partial or complete sale can be life changing and for those that have some gas left in the tank a sale to private equity, whilst retaining a significant stake, has become an increasingly attractive option.

Emotional and financial considerations

One partnership we sold recently was perhaps our most reluctant seller. They did very well out of the deal financially but prized their independence and unstinting focus on quality. 

However, the need to invest heavily in facilities and equipment, as well as deal with succession issues, meant that joining forces with a larger group was the best and perhaps only way to secure the future of the business.

The feeling that an owner has taken their business as far as they can is common and often vendors see real benefits for the company and the employees in selling to a better invested group. Some companies just need a fresh injection of ideas or capital.

Favourable tax rates can be an added incentive to sell but are rarely the real motivating force. The tax tail doesn’t wag this particular dog. 

Careful and skilful execution

Whatever the reason for the sale, it can be a stressful, draining, and emotional experience. Careful planning and skilful execution can certainly help to ease the pain and secure the best result, as well as engaging experts, who do the hard work on your behalf of course.

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