As a business owner about to begin the process of selling your business, it is important to consider how the process itself is likely to impact the business and the people working in it.
As a rule, it is unwise to share with the wider business that you are planning to sell it. Knowledge that something is likely to happen, without knowing what that something is, will inevitably create uncertainty and will distract people from getting on with their work at a time when you really want them to be focused on “business as usual”.
Vendors often find this secrecy uncomfortable. Frequently they will have employees who are not only longstanding colleagues but also friends and it feels as if they are being advised to lie to those friends. The reality is that those colleagues and friends will only worry about the process outcome if they are aware of what is going on and until it is clear what deal will happen and what the plans for the future of the business are going be, there is nothing constructive that you can say to them.
Despite this general advice to keep quiet about the process, you will almost certainly need to bring certain individuals into your confidence to help you meet its requirements. Usually, your most senior finance person will need to be heavily involved even in the preparation stage, providing information to your advisers, helping to populate a virtual data room and supporting the preparation of a financial model that will underpin financial due diligence and help define the bidding EBITDA figure.
If you are planning to offer the business to private equity as well as trade bidders then if you are to achieve an exit and not be locked in, you will need to field a management team who can run the business in your absence and with the ambition to want to grow it and to lock into an equity position. For many founders, this is a key challenge which needs to be planned for well in advance. Though it is perfectly possible to run a “trade only” exit process, private equity buyers widen the field and frequently offer more than trade.
If management are to be actively involved in the process, then they will need to spend time understanding the implications of private equity ownership, to ensure that they can respond effectively to questions about all aspects of the business. As above, this can take their eyes off the “business as usual” ball with unhelpful consequences.
While it is entirely possible to run a process so that most people in the business are unaware of any potential change, there are key people who will need to invest time in preparing for an engaging with the process. Since this needs to happen without any negative impact on the business itself, it requires thought and pre-planning to get right. One thing potential vendors often consider, is rewarding their management teams and key member of their finance and admin support with some kind of exit bonus. It can significantly soften the blow of the additional burden of work that the process itself entails. Equally, with long term planning, many vendors will put shares in the hands of key members of the team through share option schemes, giving them some value to “roll” into a private equity deal or the opportunity to cash something out in a trade deal. Again, this better aligns their interests with yours and makes the extra work they will have to do worthwhile.
As a business owner about to begin the process of selling your business, it is important to consider how the process itself is likely to impact the business and the people working in it.
As a rule, it is unwise to share with the wider business that you are planning to sell it. Knowledge that something is likely to happen, without knowing what that something is, will inevitably create uncertainty and will distract people from getting on with their work at a time when you really want them to be focused on “business as usual”.
Vendors often find this secrecy uncomfortable. Frequently they will have employees who are not only longstanding colleagues but also friends and it feels as if they are being advised to lie to those friends. The reality is that those colleagues and friends will only worry about the process outcome if they are aware of what is going on and until it is clear what deal will happen and what the plans for the future of the business are going be, there is nothing constructive that you can say to them.
Despite this general advice to keep quiet about the process, you will almost certainly need to bring certain individuals into your confidence to help you meet its requirements. Usually, your most senior finance person will need to be heavily involved even in the preparation stage, providing information to your advisers, helping to populate a virtual data room and supporting the preparation of a financial model that will underpin financial due diligence and help define the bidding EBITDA figure.
If you are planning to offer the business to private equity as well as trade bidders then if you are to achieve an exit and not be locked in, you will need to field a management team who can run the business in your absence and with the ambition to want to grow it and to lock into an equity position. For many founders, this is a key challenge which needs to be planned for well in advance. Though it is perfectly possible to run a “trade only” exit process, private equity buyers widen the field and frequently offer more than trade.
If management are to be actively involved in the process, then they will need to spend time understanding the implications of private equity ownership, to ensure that they can respond effectively to questions about all aspects of the business. As above, this can take their eyes off the “business as usual” ball with unhelpful consequences.
While it is entirely possible to run a process so that most people in the business are unaware of any potential change, there are key people who will need to invest time in preparing for an engaging with the process. Since this needs to happen without any negative impact on the business itself, it requires thought and pre-planning to get right. One thing potential vendors often consider, is rewarding their management teams and key member of their finance and admin support with some kind of exit bonus. It can significantly soften the blow of the additional burden of work that the process itself entails. Equally, with long term planning, many vendors will put shares in the hands of key members of the team through share option schemes, giving them some value to “roll” into a private equity deal or the opportunity to cash something out in a trade deal. Again, this better aligns their interests with yours and makes the extra work they will have to do worthwhile.
