Introduction
Selling your company is a significant milestone, and if you position yourself correctly, it can lead to outstanding returns. You’ve built your business from the ground up, and now it’s time to reap the rewards. Selling a business is a complex process. It needs careful preparation and strategic planning. This helps maximize the company’s value and return for shareholders and investors.
At Pivotal Scientific Limited (PSL), we understand that every business is unique. That is why a tailored approach is essential when preparing your company for sale. Below, we’ll outline the critical factors you should consider to ensure a smooth, profitable sale.
What You Need to Know Before Selling Your Business
Many business owners believe their company will command a high valuation based on scientific know-how and potential. However, these do not necessarily translate to value in the eyes of buyers. Here’s what you need to focus on:
- Profitability Over Revenue
While high revenue can sound impressive, buyers are primarily interested in profit. The value of your business is not in how much you make, but how much you keep after expenses. Profitability and EBITDA are the key metrics that buyers evaluate after revenue. Valuation multiples are generally calculated on EBITDA. - Current Performance Matters
Buyers won’t be swayed by your business’s past glory. They are more concerned with recent performance and the company’s future sustainability. If your company has demonstrated steady growth, preferably at or above the wider market rate, buyers will be attracted to that upward trend. Additionally, they will want to see realistic, strategic plans and forecasts for continuing that growth. - Focus on Strategic Planning
Having a well-defined business strategy and plan in place shows potential buyers that your company has a clear path to growth. A structured plan shows that the business is properly managed and has a strong foundation for future success.
How to Position Your Company for Sale
The more prepared you are, the smoother the sale process will be, and this typically leads to a higher valuation. Quick, unplanned sales can result in lower offers, as potential buyers may perceive more risk.
- Prepare for Due Diligence
Buyers will conduct thorough due diligence, which can take several months. Keeping your financials, contracts, and operational systems organized and clear will speed up this process. This can also help raise the final sale price. - Highlight a Strong Team and Systems
Buyers are attracted to businesses with strong teams and established systems that allow predictable and steady operations. If the buyer can step into a well-oiled machine and continue making profits from day one, your company will be in a prime position for acquisition. - What Makes Your Business Attractive?
You need to clearly identify what makes your business valuable. Is it your novel technology? Your new product development pipeline? Your recurring revenue stream? Your loyal customer base and ongoing supply agreements? Focus on the elements that a potential buyer finds most attractive, and ensure those areas are as strong as possible.
Strategic Fit is Key to a Successful Sale
Not every buyer is a good fit for every business. A poor strategic fit can lead to resource drains, loss of revenue, and damaged morale.
It’s important to carefully assess whether a potential buyer aligns with your business’s vision, culture, and goals. If the fit isn’t right, be ready to walk away from the deal. Forcing a bad fit can lead to problems for everyone involved.
Why Preparation is Critical
As the saying goes, “By failing to prepare, you are preparing to fail.” Selling your business involves more than just finding a buyer. You must prepare your business for sale. Start by identifying its strengths. Next, address any weaknesses. Finally, make your business as attractive as possible to potential buyers.
The Process
Even if you have carefully considered selling your business, you feel good about your reasons. You believe the time is right for you and your staff. However, finding buyers and going through due diligence can take a lot of time. You will also need to answer many questions about how and why you run your business. This process can be highly time-consuming and emotional at times.
This must be managed while maintaining ‘business as usual,’ a strong growth trajectory, and a full order book. You may choose to manage the transaction yourself or consider retaining the support of a specialist consultancy to help mediate between yourselves and the buyer.
Whilst M&A support consultants are optional when selling your business, you must engage the support of legal and financial professionals with specialist experience in mergers and acquisitions. Your team of legal, financial, and consulting professionals will work for you. They will secure the best possible terms and conditions of sale for your business in the shortest possible time and can help you gain peace of mind throughout the process.
Our Expertise at Pivotal Scientific
Since 2019, Pivotal Scientific Limited (PSL) has successfully completed over 100 biotechnology strategy reviews, 20+ sell-side transactions, and 30+ buy-side projects. Our experience allows us to guide business owners through the entire Mergers & Acquisitions (M&A) process, from preparation, finding a buyer, through due diligence and negotiation to closing.
We offer comprehensive M&A services, helping shareholders of independent businesses optimize their sale and achieve the best possible outcome.
We are a company owned, managed and staffed by life scientists with over 50 years’ of combined experience running and managing SME life science businesses. With over 40 years of combined experience in life science M&A and strategy across the team, we understand where you are now and how to achieve your exit goals.
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