Selling your business in 2 to 5 years ? plan ahead

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Thinking of selling your business ?

I am finding increasingly common in Asia that baby boomers are looking to sell up. More in their 40’s and 50’s, those who have ridden some of the booms and busts in Asia, have built a decent business and are looking for something else, for a variety of reasons :

  • maybe to return home
  • maybe to retire in Asia
  • sometimes just to take a break for a while having worked their arses off to build a business and getting to the age that, with a dependent family, they are not wanting to risk all their capital again in the next inevitable crash

Whatever the reason, their are plenty of buyers out there looking to buy businesses in Asia.  Some are existing businesses who are looking to enter Asia and may look to buy an existing business, some to expand their geographic area, others to add vertical or horizontal businesses, in these cases the key is to find the right buyer and the right fit, and therefore obtain a better number for your sale. Others are individuals looking to buy a business, these are generally smaller deals.

Either way, when looking to sell, start early.  For a larger SME (revenue more than $10m) start at least two or three years ahead, in order to be able to  :

  • understand what the business is worth now and what you want it to be worth
  • restructure the business, organisation, shareholdings as necessary
  • improve the business and it’s value
    • address strategic areas that will improve value for buyers
    • reduce activities or business areas that are negative or may not improve value
  • get a detailed review of corporate and potential personal taxi issues and plan any possible reductions
  • address and build a due diligence pack
  • find potential buyers and what they may be looking for
  • go through the sale, legal and due diligence process

It is a major decision for you, your family and business partners, and starting the process of building for a sale enables you to determine if it’s something you really want to do. But once the decision is clear, preparation is key and a rushed sale will not allow you to extract the best value. It will also ensure that all the major issues are addressed prior to any sale discussions taking place, and therefore ensure that you do not waste time and money getting into negotiations and due diligence which may end in failing to sell.

Do not underestimate how long it will take for the negotiations and sale to take place. Depending on the size of business, an average SME at say $25m revenues could take 3 to 9 months for a sale to be completed after identification of a buyer – partly in negotiations, partly in due diligence, always in various unexpected delays in legal and documents, delays and mind changing and mind games by buyers and sellers etc.  After that there may be a transition period or an earn out period which is a seperate question in itself. Equally don’t forget the disruption to business that this will cause and that you have enough solid management resource.

If you are thinking of selling your business, give us at CFOCounsel.Asia a buzz on +852 9528 7053, we can have some early discussions on plans and work with you throughout the process to make it clearer, less stressful and more valuable.

CFO Counsel

If you are interested in the support we can provide SMEs learn more at CFO Counsel Asia

Learn more here about our services related to selling a business and enhancing value

Learn how to sell your business in a couple of pages here – of course it would then be better to ask us for more details and to engage us to manage the process for you in order to obtain better value

 

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