10 Insider Insights

To mark our fifteenth year in business here in the UK, here’s 10 insider insights from the world of M&A.  With the support of a great team, I’ve led 15 companies through a successful sale process to date.  And with 3 deals completing next month and a further 6 in the pipeline for 2025, here are a few things I have learnt about the world of mergers and acquisitions (‘M&A’):

1. It requires considerable skill to sell a company. There is a reason that 60% – 80% of companies in the UK don’t sell – and that’s because there are many ‘moving parts’ from strategic issues to hundreds of financial and operational details that need to line up to bring about a successful sale.  Selling a company is SO much more than simply finding a buyer, it involves painstaking support and guidance over a long period.
2. Preparing a business for sale adds tremendous value.  Preparing a business for sale is a structured and highly disciplined approach to ensure the business is ready for sale.  It should address all aspects of the business, all the way from strategy to operations, marketing, HR, supply chain, finance, legal, tax and so on.  It can take 1 – 2 years to get right, and it can make a massive difference to the end result.
3. There is a world of difference between ‘business brokers’ and good M&A boutiques, Investment Banks and Corporate Finance firms.  A good advisory firm will provide expertise and guidance that provides a demonstrably better outcome on several metrics.  And remember, as it is for pretty much anything in life, you get what you pay for.
4. The best outcome for a company sale is usually a ‘strategic buyer.’  A strategic (or trade) buyer usually offers the best long-term future for the business.  Private equity is generally focused on ‘flipping’ the investment in 3 – 5 years.  Occasionally, this is a good thing, but mostly it is financial engineering.
5. Beware of publicised EBITDA multiples.  When a privately owned company is sold, rarely are the detailed financials of the deal made public.  And because most business owners don’t know the difference between enterprise value and equity value, throw in deal assets like cash and property, and it’s possible to create a masterful illusion on the multiple achieved.  The reality can be quite different.
6. EBITDA is a key metric. Yes, there are many financial metrics that are important to a business, but for companies with revenues < £100M, the #1 metric that drives valuation is EBITDA…
7. Business owners are generally inexperienced as to the sale process.  I’ve dealt with some great entrepreneurs who have built world-class companies.  But the sale process is something that comes as quite a shock.  As Sam Harris says: “As it is with any challenging endeavour, the difference between being utterly misled by false information, being nudged in the general direction, and being precisely guided by an expert is difficult to overstate.” Having an experienced guide makes all the difference…
8. Business owners rarely think about optimising their balance sheet.  There is a lot of value that can be liberated from a balance sheet when selling a company – and some business owners inadvertently leave that value on the table.  Having a strong financial engineer by your side to help see your balance sheet ‘as a buyer’ will see it is invaluable.
9. Business owners are hesitant to hire their replacement before selling.  But this is essential if they are to exit successfully for the best price, best deal structure.  Buyers rarely (if ever) pilot in new management, and instead want their new investment to operate smoothly from day one.  And if the owner wants to exit straightway, then the solution is to have a capable management team installed and operational right from the outset.
10. Deal-Maker Awards: The UK hosts various ‘Deal-Maker of the Year Awards’, where the “best” deal-makers receive their gongs.  But look closely, and you will see that the awards are organised by, you guessed it, the same people who win the gongs.  Rarely an ‘arms-length’ exercise…

So that’s it for now.  A week’s holiday beckons, and I shall be enjoying time with my family and a little 2-wheel fun…

Friends, I wish you a Happy Summer!