Selling your business: How to avoid getting carried away
If you’ve ever dreamed of selling all or a part of your business, now might seem like the ideal time to start the process, in light of a more favourable economic climate. John Derrick, Director for Key Clients and Family Offices, explains why the market cycle is just one of many factors you should consider, in your efforts to secure the best possible outcome for yourself and your family.
A number of signals have emerged in recent months suggesting that the global economy is pulling away from the worst of the turbulence, in turn creating a better climate for those entrepreneurs who might want to sell their business.
Evidence of the recovery can be seen in western stock markets which have become more vibrant, with the rise in IPO activity indicating a return of investor confidence and risk appetite. At the same time, mergers and acquisition (M&A) deals are picking up, as companies which had been cautiously sitting on large cash piles during the worst of the downturn, now appear more confident about investing.
Furthermore, the latest edition of our own “Entrepreneurs Index” highlighted how the percentage of high growth companies with a turnover between £2.5m to £100m is increasing, with a renewed buoyancy across traditional sectors such as manufacturing. This all bodes well for the global economy but what could it mean for you as a business owner?
Understanding what you want and what you need
Despite these strong signals suggesting that today’s environment is potentially more conducive to selling your business, it is vital that you take an holistic view of what you want, why you want it, and what the implications will be – from your personal motivations and family circumstances, to the tax implications and your general intentions post-sale. This is advisable not only because the sale of a business can be a long and intense process but because, by doing the big thinking now and looking at your position regarding Entrepreneurs’ Relief as early as possible, you can help secure the most favourable outcome possible, whilst avoiding expensive mistakes.
When our clients come to us for impartial advice about selling their business, it can be for a variety of reasons. They may be reaching retirement and need our advice on their succession plans; their business may need the scale of a larger partner to keep on growing; or they may simply have received an offer for the business that seems difficult to refuse. Regardless, our role is to help them take a step back and consider all viable options and implications for them and their family, before committing to a deal.
For example, we may help our clients to:
- Understand and capitalise on measures such as Entrepreneurs’ Relief.
- Structure their finances ahead of a sale to ensure tax-efficiencies – a key element before negotiations commence.
- Manage the influence of emotion - entrepreneurs have a unique level of involvement with their businesses and Barclays has an industry-leading understanding of what drives our clients, as seen with our behavioural finance infrastructure.
- Decide whether to walk away from the business entirely, or remain on the board as a director via an earn-out arrangement.
- Plan a wealth management structure which best supports future lifestyle choices and possible business plans.
- Implement their unique estate and succession planning strategies, working closely with our various specialist teams.
- Prepare them for life after the sale. Many entrepreneurs fail to do this and end up regretting the fact they did not make any plans. (NB: This will be the subject of the second article in this two-part series.)
How Barclays Wealth and Investment Management can help
We are ideally placed to help our entrepreneurial clients thanks to a global network of expertise and an industry-leading understanding of what our clients would like to achieve.
Through a number of thought leadership initiatives each year, such as the aforementioned "Entrepreneurs Index", and as a result of our large footprint in the UK, we are able to strengthen our relationships with the entrepreneurial community, guaranteeing that we are at the forefront of key trends.
Whatever life event is driving your decision to consider an exit strategy, your Private Banker and Wealth Advisor will be there throughout the process. Especially upon completion of the sale, when the time comes to consider how best to make your hard-earned rewards work for you. When an exit strategy is completed, it is often the beginning of a new journey and Barclays can advise and support entrepreneurs who are ready to move into a new stage of their lives.
Many entrepreneurs have professional advisors who have worked with their business since the early days, and with whom they have a strong relationship. We are of course happy to work in partnership with them too, recognising that relationships and continuity are valuable.
Equally, as a client of Barclays Wealth and Investment Management, we can connect you to the appropriate teams at our Investment Bank, on issues such as IPOs and M&A. And we can connect you with select external corporate finance companies for even more specialist expertise, in instances where you might need further advice on a particular sector or transaction type.
Case Study - Find out more
Please do contact your Private Banker if you would like more information on these issues, and our case study highlights an excellent example of how entrepreneurial clients can achieve great results when the decision to sell becomes a reality.
If you have questions relating to the articles, please contact your Private Banker.