How to Secure Eye-Watering Returns when Selling or Acquiring a Business
We were delighted to welcome Brian Williamson, winner of our 2016 Lifetime Achievement Award as the speaker at our Masterclass in Edinburgh on the 10th of October, sponsored by Mazars/Elev8byMazars. Brian was awarded the Lifetime Achievement Award in recognition of his significant contribution to the Scottish entrepreneurial community and beyond.
Brian is an engineer, a professional businessman and an award-winning entrepreneur. He draws on the knowledge and experience he gained in a fast-advancing managerial career in industry, and from his success in high growth business situations. He has a mix of acute commercial awareness and a keen eye for entrepreneurial opportunities. Brian has utilised his considerable interpersonal skills to allow him to complete a number of investments and exits for both himself and others. He has exited 7 businesses and acquired 12 therefore had a wealth of experience to share with us.
In 2017 Brian was recognised by Glasgow Caledonian University for his contribution to entrepreneurship with an Honorary Doctorate.
“I believe in life-long learning and we only lose our way in business when we lose the appetite for learning.”
Most entrepreneurs naturally work hard on profitability but Brian’s first question to attendees was “What really adds value to businesses?” Competitive tension, brand loyalty, long-term contracts, scale, advisors, scarcity of targets in the sector can all have significant impact and value comes not only from profitability but also from what a business is worth to someone else. Vendor access to a buyer’s clients and vice versa can work well if it’s a complementary business.
“Customers, partners, products and profits are driven by their value in relation to the ideal buyer/vendor fit. This leads to a wealth creation strategy rather than only a profit driven strategy.”
Brian used several examples of companies where upon the initial analysis of profitability, the sale figures seemed elevated, however, on deeper investigation, there were other reasons why the figures were high. Buying power, market monopolies and whether the business model is replicable can also inflate the price paid for a business.
Brian shared key drivers of value in a business which included understanding the buyer’s desires/aims/objectives, competitive tension, access to new markets, timing, customers/technology and perhaps the seller has reached a ceiling – this could be for a variety of reasons including limitations of the existing team.
Brian also highlighted the importance of having the right people around you and involved in the sale of a business including legal advisers, a corporate finance house, strategic advisors who can act as a go-between between seller and buyer and appointing brokers if applicable. Other key considerations include ensuring that your shareholders are on the same page, permission from lenders, the returns for your investors as well as the importance of your staff and management team.
With the sale of any business, entrepreneurs need to be aware of pre-sale traps which Brian highlighted as the following:
- Employment contracts.
- Customer contract.
- Property lease.
- Accounting due diligence.
- Lack of operational control.
- Warranties & indemnities.
PRICE & PAYMENT TERMS
- Cash or paper?
- How much on completion & is there an earn out?
- Does the buyer have liquidity?
MANAGEMENT & STAFF
LEAKAGE TO MARKET & COMPETITORS
In his closing comments, Brian said:
“Your end game will drive the direction of your strategy.”
Our thanks to everyone who attended and contributed to making the event highly interactive and a huge success, as well as to Brian for outstanding and hugely beneficial sharing of his experiences and knowledge.
BRIAN’S BUSINESS INTERESTS 2017 – 2018
- Jumpstart (2009 – present) Director and CEO and from September 2017 Non Exec
This is a company that specialises in the construction and submission of R&D tax relief claims. It does this by hiring scientists and training them through a self-built on line academy and now employs 70 people. Brian recruited and trained a 49 strong contingent based self-employed sales force. He built this business with no cash into the fastest growing SME in Scotland between 2010-13 as recognised by Business Insider. In 2014 he secured a £3.4m investment from BGF which valued the business at £12m. From zero to £12m in five years.
- ThinkWhere (April 2017 to present) Chairman
Brian was recruited as Chairman to deliver an exit plan for 2 local authority shareholders and return the business into private hands. Currently this software business delivers Geographical Information systems and data sharing solutions on a global basis. The current shareholders wish Brian to take the ownership of the business from public to private ownership.
- Miigen (August 2017 to present) Chairman
Miigen is a social impact platform for individuals and families. It allows them to establish a personal time capsule which will be the story of their life and a legacy to leave to the generations to come. Brian’s role is to support the CEO to raise £250k of seed funding (complete) and to raise second round funding in 2018.
- Kissing with Confidence (August 2016 to present) Entrepreneur in Residence
KWC is a business that specialises in business development training and is some twenty years old. It works for the largest professional organisations such as the Big 4 accountancy practices and some of the country’s leading law firms. Brian’s role is to guide them through their high growth phase and be an ambassador for the business.
- Brightwork Ltd (2006-2017) Chairman. SOLD 2017.
This is a company, which was born out of the Management Buy Out from Hudson, the international recruitment company. Brian steered the growth sales from £5m at point of purchase to £36m by December 16. The business was sold in May 17 for an 8.1 multiple of EBITDA returning to founding shareholders 75 times their original investment.
Click HERE to connect with Brian on LinkedIn.
Click HERE to follow Brian on Twitter.