M&A Insights – Timing Your Exit

Posted on Feb 04, 2020 in M&A Insights

Is it the right time to sell my business?

This is a question we are asked all the time. We see three principal elements that should help inform the decision to sell:

  • Personal timing (ie. your objectives)
  • Business timing (ie. its current performance & immediate prospects)
  • Market timing (ie. the market dynamics of your particular sector and the M&A activity therein)

We always start with personal objectives of the current owner-manager(s). This is your business and it should satisfy your personal objectives, though establishing these is often harder than you might think! They are the bedrock to a successful future sale, but when was the last time you really thought about them?

Leaving it too late is a common problem. Either the owner-manager has lost his/her impetuous and desire, and business performance starts to suffer, or they still have the desire but their own performance has declined and with it, the business’s. To exert negotiating pressure there is a need for the owner-manager to be happy and willing to continue working in the event that the business is not sold.

What about business performance? The ideal scenario is for the business to have addressed the key issues identified in a pre-sale review and have evidence of consistent profitability coupled with a strong performance during the sale process. The sale period often extends to at least 12 months, so in any decision to put a business onto the market, the performance over the next 12 months is at least as important as the preceding period.

Finally, the market. How important is it to get the market timing right? In truth achieving a perfect congruence of all these factors is often impossible, as the three elements are largely independent. However, if the personal timing is good and Business performance is OK, then this can be enough to achieve a successful sale, even if the market is sub-optimal. Similarly, if the business performance is not ideal but the market is flying and the personal timing is good, it can still be a good time to sell.

Remember Meatloaf’s adage – “2 out of 3 ain’t bad!”