Is your management a selling point?
When your company is for sale, potential buyers will always look very closely at the key people running it.
When you’re selling your business, it’s important to remember that the management team is one of the business’s chief assets – and can make or break the sale.
While you may have been working with your managers for many years and some may even be shareholders, are they people who can lead the company to a successful exit and beyond?
In most cases, you would hope that, having got you this far, they can continue to deliver results. But preparing for a sale can be a moment when tough decisions must be made and that could mean bringing in new senior people or even losing some of your less able managers. Neither of these promises to be easy for existing members of the team.
“Buyers are obviously looking to mitigate their risks,” says Martin Brown, chief executive officer of SME growth advisor Elephant’s Child. “They need to feel confident that all the core people are in place, are sufficiently incentivised and motivated, and have the necessary skills and talent to ensure the business can fulfil its potential.”
Moreover, you cannot afford to leave working out management handover plans to the last moment – it should be high on the priority list for sellers.
With a typical sale process taking 18 months to three years to complete, the foundation stones must be firmly laid first,” says Brown. “Once you’ve made the decision, you have to start planning immediately and ask yourself: what does it take to drive this business and exit it?” Brown recommends outlining a clear strategic intent for the business in a three-year plan; and then drawing up an operating plan with a budget and a clearly defined organisational structure.
The mix and skills of the team must be able to meet current needs and take the business beyond the sale process – gaps can be filled through promotion and development, recruitment or outsourcing,” he says. “It’s important to have a clear succession plan in place, not just for yourself, but for all core team members, as people might have to step up if someone leaves. Failure to do this can kill an acquisition or drastically reduce the transaction value.”
Martin recommends getting specialist human resources support and a business adviser on board to minimise disruption. This enables existing managers to focus on their usual roles, and helps you to manage personnel issues. After all, personnel issues can end up having a big impact on the sale.
Having the right team in place was essential for the buyers when Dr Anthony Thomson sold his business. Thomson founded HaloIPT in 2008 to develop charging technology that the University of Auckland had been working on and license it to major automotive component specialists. It was the world’s first wireless electric car charging system.
In 2010, HaloIPT was incorporated with new investors and business partners on board, including engineering giant Arup. Led by Dr Thomson, it boasted ten carefully-selected young engineers, a new chairman and two university professors; these last two acted as contracted chief financial officer and chief technology officer.
“I’d developed the five-year plan, but consulted a panel of ten relevant automotive and tech company experts, such as former General Motors vice chairman Bob Lutz and Chargemaster boss David Martell, to revise, strengthen and refine our strategy,” says Dr. Thomson.
Condition of sale
Less than two years later, a consortium led by Qualcomm, a technology giant, was approached to be an investor. But it was so impressed with the London start-up’s potential that it made a multi-million-pound offer for the company; the offer was accepted.
A condition of sale was that myself and the team moved to Qualcomm wholesale,” says Dr Thomson. “In fact, most of the original team are still there in senior positions, and I only recently left to become a growth planning specialist advising SMEs.
“Qualcomm’s offer to buy was unexpected, but the company evidently thought we had good people on board, and massive potential. It demonstrated to me that having the right team and strategy in place definitely makes start-ups attractive to buyers.”
Where the opinions of third parties are offered, these may not necessarily reflect those of Cooper Associates Accountants.