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Article

Opportunistic market and reflection-time leads to exit planning abundance

Article

Opportunistic market and reflection-time leads to exit planning abundance

31 May 2022

2 minute read

As previously mentioned in my article Seeking funding or investment from a position of strength the SME market for mergers and acquisitions have resumed to pre Covid levels. I speculated this was due to a build-up of cash reserves as a result of lack of investment during periods of high scepticism and risk in the market.

Opportunistic market and reflection-time leads to exit planning abundance - news article image

Unlocking opportunity from uncertainty 

As previously mentioned in my article Seeking funding or investment from a position of strength the SME market for mergers and acquisitions have resumed to pre Covid levels. I speculated this was due to a build-up of cash reserves as a result of lack of investment during periods of high scepticism and risk in the market. 

Alongside these risk adverse individuals are business owners who have also taken the opportunity to look towards retirement whether this be early or not, in order to sell their business and avoid future risk. 

These two indicators give rise to a perfect market dynamic, which we can see with the boom in M&A activity within the SME market. However, this does not mean this process needs to be rushed - building to sale is an important process on the path to successful and rewarding exit. Below shows the exit route map we point our clients towards at the point of sale or rather thinking toward sale.

We can see the many avenues to exit, all of which require important planning to reduce costs, maximise return and prevent future issues. Looking at the most prevalent issue maximising return, there are many improvements we can look at to improve a business value. Such as; credit control, systems and control improvements, structure for tax efficiencies, review of contracts and incentivise staff and improve employment/management structure, among other aspects. 

All these can help towards improving the saleability and value of your business. Valuations can vary based on market activity, market interest, synergies with potential purchaser and many other factors. However, sometimes it can be helpful to ascertain a professional business valuation before engaging in the process of sale and negotiations. It would be important to consider forecasting models in this business valuation and indeed this would likely be needed for the investor/purchaser. Given they are purchasing future profits and earnings this is in essence what they are paying for, so it is important to carefully consider these forecasts, budgets and business plans and ensure they are prepared to a high standard. Therefore, important things to consider are justifications for assumptions, standard 5% rises only meeting inflation needs, domestic issues such as electricity bills rising, cost of living rising, and potential salary rises to counter this and any other external and internal factors that may be sector specific. 

Should you wish to discuss building for sale, valuations or forecasting in more detail please do feel free to contact me for a consultation as to how we can help or simply some advice for you to take away.

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Need expert advice?

Speak to an expert for advice on
+44-1865 292200 or get in touch online to find out how Shaw Gibbs can help you

Email
info@shawgibbs.com

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