Blog

Welcome to my Blog Page. These posts seek to cover the broad panoply of issues, conundrums and thoughts that occupy the professional service entrepreneur’s mind.

A combination of extracts from my guides and current musings (often provoked by recent happenings at the great companies I now advise to), my aim is to inform and motivate all those who seek to build high performing teams and successful businesses.

I also enjoy responding to specific reader questions … so please feedback and let me know where you would like my mental meanderings to wander to next.

How do you improve the chances of selling a business to an interested buyer?

4 December, 2012 at 17:29

That question was recently posed on quora.com.

And, it is an excellent question because if you understand the answer to this now – ideally early on in your journey to build a business – then you are far more likely to derive due reward for your efforts in the future.

But – before I answer it – a really key caution. There is an old maxim in M&A that says “one buyer is no buyer”; put another way you should be very, very cautious with regards the single, unsolicited approach. Only in the very rarest of instances will it unlock maximum value in your business. Far, far better for you to be in charge of the process and run a competitive tender exercise with adequate advisory support.

That is an important premise before my main answer … which is that you maximise the chances of selling by maximising your company’s value or attractiveness. I answer this question in detail in guide module 02 (‘The Fundamental Components of Value’).

Fundamentally, the core valuation approach for such businesses is a function of:

EBIT * Multiple (with the multiple being a more subjective buyer evaluation of the ‘infrastructure’ or   ‘capability’ of your business to sustain future profit growth).

The interesting part of the question – once you are in profit growth – is how to really maxmise this multiple. When I built and sold Moorhouse, we analysed the top ten sub components of such a multiple i.e. the ten key capabilities we needed to excel in. We then put a project team effort onto each of these with the target of developing our capabilities (tools/processes/behaviours) in each area – such that we grew our attractiveness/value (and, therefore, chances of being sold).

There are many other layers to this question (not least the detail as to how these multiple components break down – all covered in Guide 02) but hopefully this high-level response is helpful.

Good luck!

 

 

To download Guide 01 (from which a number of these blogs have been extracted) for FREE see here.

FREE iPad version available in the Apple iBookstore also (search ‘Personal Motivation and Circumstance’ or ‘Dom Moorhouse’).

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