Top tips for a successful sale process for your agency
With CGT rises possible in 2022, now is the time to prepare for the sale of your agency. A typical sale process can take between six and nine months, so early planning is essential.
Here are top tips for agency owners looking to sell and how to avoid the common pitfalls:
1. Be clear on your aspirations – make sure you know exactly what you are trying to achieve and that all shareholders are aligned. While value will be an important consideration, you should also think about the culture of potential purchasers, your preparedness to stay on post-transaction and the effect of a sale on your team.
2. Have realistic valuation expectations – having a good understanding of the current M&A market trends will give you a good idea of how achievable your aspirations are.
3. Appoint credible managers – your second-tier management team will need to be motivated, highly skilled and committed. For founders to exit, succession planning is critical.
4. Review the quality of your income – minimising customer concentration risk and maximising profitable, recurring revenues support higher valuations.
5. Remember purchasers are buying the future not the past – your forecasts are key and the best valuations are for fast-growing businesses. Forecasts must be realistic and deliverable to maximise the realisation of earnouts.
6. Identify your sustainable earnings – it is common to normalise historic results, presenting them with one-off, exceptional or personal costs removed from the cost base. Evidencing that these adjustments are reasonable and justified is important to maintain credibility.
7. Understand the working capital requirement of your business – it is important to allow for excess working capital or cash balances to be realised in the price of your agency.
8. Prepare for due diligence – it is never too early to prepare for due diligence. Controlling this process and ensuring it is efficient and well-managed will minimise the potential disruption to the transaction. It will also prevent your management team from being distracted at a time when it is important to maintain focus on delivering your results.
9. Take early tax advice – this will help to make sure your business structure has been optimised and that you have put in place all necessary arrangements, including share incentives for key staff. Such planning must be undertaken before any decision to sell is made.
Having completed over 500 transactions, including 67 in 2020, our team of corporate finance experts have successfully navigated even the most complex of situations for our clients.
If you are considering the sale of your agency, contact us to find out how we can help you.