The decision to sell all or part of your business is an emotional as well as financial decision.
You will need to have some understanding of the process and its timescales involved, and where to go to achieve your ambitions.
Whilst you will look at various alternatives, it makes sense to talk to those who have not only purchased businesses, but have done so successfully. This would be an organisation that not only understands the huge work and personal pressures, but is also happy for you and your colleagues to talk to those who have made the journey, and survived!
Established in early 2006, CCV was created to provide a less intrusive option to potential vendors who wanted a secure way of selling their business into an established network of businesses, and had a business where continuity of name, succession planning and staff are almost as important as the financial security a sale would bring.
CCV are not just experts in acquiring business, we are also determined to retain and grow existing client books through exceeding product and service standards. The acquisition journey is demanding and emotional, but never boring and often hugely fulfilling.
The First Meeting
Be armed with a basic knowledge of:
• Your overall premium volume
• Your major product lines
• The expenses of running your business
• Your profit (loss) for the last 3 years.
Plus some details of property, key staff, insurer partners and other useful headline information.
Also be prepared to ask about:
• What would happen to your business
• And your staff
• And you, in the event of a sale
• The process
• Funding availability (vital)
• The earn-out mathematics and process.
It is usual for a potential purchaser to ask you to sign a mutual confidentiality letter to protect both parties, and to provide details of the information required to enable a valuation to be produced. Daunting, but essential.
Different acquirers have different drivers for purchasing businesses.
Whilst all want to increase their market footprint some are keen to invest in holding the book of business together, and to provide further funding to recruit additional sales resource and/or other local businesses.
Valuation will depend on the quality of your business (any loss ratio data would help), your people and the general operational style of your business.
Multiples have fallen since the highs of 2008, but a good business will still command a premium which could add several thousands of pounds to a transaction.
It is key that those who value your business do so correctly if a transaction is to be successfully concluded.
It is usual for the relevant fixed assets to be automatically included in the proposed valuation.
The offer often involves an informal discussion to get a fix on where the actual offer will be pitched, followed by a formal offer letter.
At this stage the process is still “subject to contract” and not binding – but the offer letter will no doubt include a period of exclusivity (3 to 6 months) once signed, to give the prospective purchaser some time to fully review the business.
A professional purchaser will provide a ‘full’ offer from the start. But a vendor may have some “wiggle room” and may be able to negotiate issues such as:
• Earn out process/time frames
• Ongoing consultancy/service contracts
• Performance bonuses to compliment the earn out.
The offer will also depend on whether the purchaser is buying all or part of your business.
And, whether it is a portfolio acquisition, or a purchase of the business in its entirety.
A key issue, and a changing landscape. If you are selling a company then you may well be able to (automatically) apply for entrepreneurs relief on the sale which, considerably, lowers your tax liability on the proceeds.
If you are selling a portfolio it is a little more complicated. You still require professional advise, although some acquirers are able to provide a steer based on their experience.
Obvious statement, “you will need professional advice throughout the sale process”.
Most businesses (but not all) use a professional accountant, but not all have access to a professional lawyer who has a working knowledge of corporate law.
Your Trade Association, or even your purchaser may be able to point you in the right direction. And think “Fixed Price” when agreeing fees!
Insurance is a people business, and even if a vendor is leaving it will be important to consider those who are staying with the business, especially if they control or influence clients.
A vendor and purchaser may be able to jointly agree a range of financial incentives to protect the business going forward, and as a result, protect any earn out programme.
Sounds daunting, and it can be.
Every prospective purchaser will want to run their thumb over your business to ensure that what they believe they are purchasing is indeed what they are getting.
Most professional acquirers will produce a Due Diligence document that they will ask the Vendor to review, and sometimes warrant.
Certain purchasers use their own internal resource to manage the process from start to finish – and use insurance professionals for most of the Due Diligence, which makes the vendors life a little easier.
The process has to fit around your business requirements, especially if your staff are not aware of the transaction.
The New World
Acquirers are purchasing the business because they see its potential.
Most will want to realise this potential quickly, but sensible purchasers will have provided an indication of the framework for these changes, to avoid nasty surprises and staff disaffection.
You may feel, after careful consideration, that now is not the time to sell, but that your business could benefit from a third party overview to ensure you are currently maximising its true potential, through operational efficiency, markets and distribution.
We can provide a one or two day business review, producing a report that highlights the clearer opportunities you have to make your business fitter, and potentially more valuable in future.
Completion is, as the name indicates, the positive closure of the acquisition process.
Most acquisitions reach this stage with all transaction aspects agreed and documented, and as a result this meeting tends to be an agreeable, if emotional, signing ceremony.
The sadness of business sale soothed, somewhat, by the improved bank balance.
How to start that journey?
We have a small dedicated unit able to provide information on all aspects of the acquisition process.
Senior CCV personnel will meet you on or off site to discuss your personal requirements and provide you with a confidentiality letter and details of the basic information required to create an initial valuation.
For all confidential enquiries:
Tel: 01622 606 502
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