Is there a right time to sell a company?
Knowing when to sell your business can be a decision that is hard to make and often an emotive one. In addition to the time you’ve invested in its history, there is the consideration of the lifestyle the business has afforded you and also the likelihood that it has provided employment for you and perhaps other family members too.
Whilst some business owners will have their exit planned, others will be forced to react to a triggering event that requires them to make the decision. In this article I consider what these events might be:
The business remains good and profitable but you are ready to retire. If there is no obvious family succession clearly the time has come for a sale to a third party or, if appropriate, the management team.
Forecast expansion needing significantly more capital
If the company is developing at such a pace that neither your resources nor its own can fund the growth, the time may be right to sell to a larger organisation, possibly with an element of earn-out to reflect the company’s future plans and growing profit.
If cash is required for other significant financial commitments within the family, or to add some balance into a personal portfolio, a realisation or part realisation may well provide a solution.
If the business is sound but there is a fundamental disagreement between key shareholders, a sale of all or some of the equity may be required.
Externally, it is important for funding to be available and there to be confidence in the future of the economy, as well as a favourable tax regime for disposals by owners. We would suggest that all of these key ingredients are now present in the UK.
The above are just some of the examples of triggers that may lead to a decision to realise an investment in a private company. Mercer & Hole’s Corporate Finance Team would be delighted to assist you with a disposal, advise on guideline valuation or matters to be dealt with prior to a sale. To discuss further, please contact Chris Lowry or your usual Mercer & Hole adviser.
Date: 17th February, 2016
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