2020 - Could Now Be The Right Time To Sell Your Business?

When we have recently discussed business sales, people have been shocked that the middle of a pandemic could still be the right time to sell. The affects of Covid-19 may have driven you to the conclusion that now is the right time to sell which then raises the question of whether there is a buyer out there and would you get a fair price?

We are already acting on disposals which have been driven, to some extent, by the effects of Covid-19. People that have been considering a business sale, for either personal or commercial reasons, have had thinking time which has brought in to focus their goals and accelerated their decision making. In addition, upcoming rumoured changes to the current tax regime, again potentially driven by Covid-19, has also brought the timing of a potential disposal into focus.

It is likely that if you came to us and asked us to sell your business which operated in the hospitality, leisure or travel sectors, we would advise that the timing is not quite right. However, a number of other sectors are continuing to trade at historical levels or, in some cases, have been positively affected by Covid-19. Therefore we believe that now is as good a time as any and, as we outline below, there are a number of reasons why now might be a better time for certain sectors to sell.

Turning our attention to potential buyers, let's firstly consider trade buyers. We have been party to a number of discussions with business owners about how to mitigate the risks highlighted by Covid-19. This might include product development, adding a new product range, broadening geographical coverage or increasing the spread of customers. In many situations the easiest way to conclude some of these strategic actions is through acquisition. In addition, lots of businesses have significant cash reserves, whether this has been boosted by deferral of certain debts, HMRC commitments or by accessing government support or funding, there is clearly a surplus of cash sat on a broad range of corporate balance sheets. These cash resources will support the strategic decisions outlined above and drive acquisition activity.

In addition to potential corporate buyers, there is also the private equity market, which again has significant amounts of cash to invest in the right business. As one PE director recently said to us: “We are desperate to deploy cash.” There will be certain sectors that are very challenging for private equity to invest in and this will narrow the focus on certain sectors, types of business and transactions. With this narrow focus, the potential private equity interest once again supports that now might be the right time to sell if you are in the right sector.

If a partial sale is considered preferable, then an MBO may be the most appropriate option. Unfortunately, we believe this is one area where sales may be more difficult to conclude. Some of the funding sector are tightening the purse strings on change of ownership transactions, meaning there are fewer funding options. But options do remain and MBOs can be concluded.

If you are considering a potential sale of whole or part of your business, we would be delighted to assist you.

We are running a virtual 'Sell My Business' workshop on Wednesday 4th November 2020 from 09:30 - 13.30. Providing a more hands on approach for attendees than a general seminar, this interactive workshop will help you to consider:

• your potential value

• the changes you can make to increase your value

• who the buyers might be for your business and their respective pros and cons

• the best routes to market.

We expect you to leave the workshop with a clear strategy, a list of action points for you and/or your business and hopefully a better understanding of the process involved in a sale.

If you would like to book a place on the workshop, either book via this site or please email Harry Bushell on harry@mackenziespencer.co.uk