"It’s vital to have talented, motivated and aligned leaders running the show who have an impressive track record and the capability to execute on strategy."
Mike Mills, Deal Advisory Partner, KPMG
Owner-managers often believe that, because they have done an outstanding job of building and running their business and know it inside out, they’re already in a good position to sell for the top price. The stark truth is that if you don’t take appropriate steps to optimise performance, you may end up leaving millions of pounds on the table.
Mike Mills, Deal Advisory Partner at KPMG, offers the recent example of a retailer whose owners hoped to achieve a speedy and lucrative exit. However, once it became apparent under pre-sale scrutiny that there was enormous scope for operational improvement and that digital plans and broader business strategy lacked rigour, compromising sale price, the owners pulled out of the transaction.
In short, they were overwhelmed by the process. “They had to slam the handbrake on to stop the deal process from careering over the edge of a cliff, and have a good long think about what they needed to do,” says Mike.
Eight steps to optimising value
If you’re an owner getting ready to exit your business, you have eight objectives for optimising value.
First, begin by telling a clear equity story, and second, outline the compelling market growth opportunities that your business is pursuing. Third, remember that investors back management teams. As such, it’s vital to have talented, motivated and aligned leaders running the show who have an impressive track record and the capability to execute on strategy.
“Think hard about the clarity of vision among the management team. Particularly for financial investors such as private equity, they are looking to back management teams and support the business through its next phase of growth,” comments Adam Thorpe, Strategy Group Partner at KPMG.
“Our experience shows that planning this properly and aligning vision and interests among the senior management builds real investor confidence. They are buying the future, not the past performance, and they need to believe that the management team they are backing is clear, aligned and capable. If you get that right you are well on the way to driving real exit value.”
The remaining five criteria to aim for are: achieving and planning further top-line growth; a sales and operating model fine-tuned for success; best-in-class margins; strong cash conversion levels and optimised working capital; and finally, a management reporting and IT system that supports all of the above.