You’ve Built a Valuable Asset – Make Sure You Get Something For It
At Growbridge, we come across many businesses that are owner managed, but with no succession plan.
Succession planning is not just a corporate catch phrase. In owner managed businesses this is one of the most critical retirement plans.
The most typical succession plan of an owner-run business is to hand it down to their sons and daughters, thus transferring amassed wealth to the next generation – a great legacy.
However these days, many of the younger generation have left the shores of sunny South Africa in pursuit of new horizons. Now when a business owner wants to retire, they can either close up shop and collect minimal capital return, or they can try to sell their business to a third party.
Selling a Business
At the outset selling your business may seem a simple task. Many outgoing business owners even have a potential buyer lined up. But there are a myriad of things to consider and risks to manage in the process. Manage the selling process well, and you walk away with no ties and a decent amount of cash. Manage it poorly, and risk losing everything.
The Ties that Bind You
There are two items that create tension between a buyer and seller:
The Seller wants certainty over the sale proceeds and wants the proceeds out before handing over the business – after all, what if the buyer runs it into the ground? Will the seller still get paid?
The Buyer on the other hand, wants to make sure they get a business that’s worth paying for. To do this, they may want to operate the business for a while first, and may want the Seller committed during to this time, before they are willing to pay up.
The Sale and Purchase Process
Most mergers and acquisitions transactions follow this high-level process:
- Deal initiation – review of the business for investment readiness – you need to put your best foot forward.
- Investor/Purchaser identification.
- Initial deal structure – direct purchase vs leveraged buy-out vs management buy-out and piecemeal vs total purchase upfront.
- Term sheet – key commercial terms agreed between Buyer and Seller.
- Due Diligence.
- Contracting and transaction closure.
While the Seller and Buyer are great business operators, this type of transaction is foreign to them. At Growbridge, our corporate finance team runs these transactions on a daily basis – from buyer/investor sourcing and deal readiness, to due diligence, valuations and final commercial structuring – we are well positioned to assist you in getting the best deal out of the business you’ve spent your life building.
We have successfully closed deals in multiple industries, including agriculture, horticulture, security, waste and property, across the SADC region.