Expert opinion

4 things to be wary of when closing a trade sale

Rob Starr, Head of M&A at Shaw & Co, highlights some of the things to be wary of when closing a trade sale.

4 minutes
May 17, 2022
Words:
Rob Starr
Images:
Tim Gander Photography
PDF:
Report

1 - Deal fatigue

When it comes to closing the sale of your business it can feel like a roller-coaster ride at times, so be prepared for lows as well as highs. As we work exclusively with owner-managers, we understand only too well that we are dealing with individuals and that the road to an exit is often the most intensive period of their working life. Because of this pressure, owners and the business itself can get worn down by the process and deals fail because of it.

While showing understanding is important, avoiding problems in advance is always the preferred option. Yes, sometimes pressure is created by unexpected issues that could not be foreseen. More commonly, however, issues can be avoided by making sure that everything is done to prepare properly, making the process of doing the deal smoother. And that will help to reduce the pressure on the owner, their team and ultimately the deal.

2 - Deal craft and tactics

There’s a lot of hard work and hard data involved in securing a sale, but it’s also an art, and the reality is that each deal, business and owner is different so there will be complexities that are unique to your process.

These complexities can include understanding specific buyer value drivers, strategic positioning to create competitive tension (be that between bidders or simply through the fear of missing out) and being able to successfully overcome deal hurdles or buyer objections – all of which form much of the ‘art’ of deal making. While it is impossible to predict the specific issues that might arise during a deal it is, in my experience, almost certain that some will occur. The value of a good corporate finance adviser is therefore not only to guide you through all the technical necessities, but to have the experience, good judgement and intuition to overcome any such obstacles along the way to deliver the right deal at the right time.

Deal craft involves focussing on the common goals between parties in order to find a way through any impasse. Inevitably, any negotiation, which the sale of your business ultimately will become, requires compromise. Understanding the points that really matter and the points on which compromise can be reached takes experience and foresight. Like a good game of chess, every move has to consider each of those that follow.

Rob Starr, Head of M&A at Shaw & Co

3 - Emotions

Sometimes negotiations get tense and emotions overcome logic. For an owner-manager in particular, deal negotiations can quickly feel personal. Removing yourself from this is one of many significant benefits of appointing a professional advisor to negotiate your deal. Read our blog ‘Don’t let emotion get in the way of negotiation.'

4 - Completion

This is the moment that you’ve been waiting for but knowing what to expect will help you get the most from the experience. After months of hard work and anticipation the moment of completion has finally arrived – but be aware that on a personal level it’s often a massive anti-climax, typically in a solicitor’s office late at night. So, it can be a good idea to have a more convivial event organised to celebrate soon after with family and colleagues.

There are aspects of completion that need to be carefully considered. PR around the announcements must be managed to protect confidentiality wishes and/or agreements, particularly around deal values. You may be sensitive about everyone knowing how much your business sold for and buyers may not want the market to know what they paid. On the other hand, there will be some regulatory requirements on disclosure, so getting expert advice will be needed to ensure you strike the right balance between being compliant and confidential.

We work with UK SMEs and small-cap PLCs that are ready to sell or dispose of a business through a trade sale or owner-managers that are looking to exit the business they’ve grown. Our value lies in helping clients assess their readiness to exit, finding the right buyers willing to pay the right price and managing the trade sale process whilst minimising associated risks. For a confidential, independent, no obligation discussion on how to sell a business, click the 'Let's chat' button.
Words:
Rob Starr
 - 
Director
Read 
Rob Starr
's bio

Keep IT Simple (KITS) is a provider of high value IT support and transformation services to public and private sector clients. Find out how we helped with their trade sale.

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