In 2023, Manchester United, one of the most valuable soccer teams in the world, was on the market with a price tag of between £4b and £6b or approximately $4.8B-7.8B US.
For business owners looking to sell their business, there are some interesting lessons to be learned from this transaction.
As an accountant, my love of Mergers and Acquisition (M&A) activity stems from the introduction of the professional era of rugby in South Africa where I was fortunate enough to be involved in corporate transactions that saw many of the big-name clubs introduce new corporate structures and ownership.
Over the years my interests and experiences collided and I started to see that closing a sale and scoring big on the sports field have a lot in common–and ring true for businesses of all sizes.
The most important overlap is having a game plan. Did you know that about half of the sales deals fall apart during the due diligence process? That’s because too many companies have to catch up on ‘overdue’ diligence instead of being ready in the sales process.
To avoid that from happening I believe business owners can learn some key lessons from sports teams in making sure they have a game plan to sell their business successfully:
The off-season is crucial for preparation to avoid injury
One of the elements that many business owners fail to appreciate is the time that it will take to sell a business and therefore very few are properly prepared for the sale. This results in slow turnaround times when a sale is imminent or a business owner being forced to sell at a lower valuation than they should.
A business that is ready for sale can take 6 to 12 months to sell – the key here is that very few businesses are ready for sale when the entrepreneur decides to sell. In many cases it could take between 2-5 years to get the business ready for sale and this means keeping the day to day operations running smoothly while continuing to plan and edge toward the desired exit.
Using the off-season to prepare your business for sale, even if you are not planning to sell yet, will give you an edge to leverage M&A opportunities more quickly when they present.
A good coach makes a huge difference:
Over the course of my career, I have met some phenomenal entrepreneurs who have built businesses into valuable assets that are the cornerstones of their wealth. I have no illusions that business owners know how to make a profit – just like I have no illusions that star players have the talent to shine on the field. Where they often fall short is that they know their game – but when it comes to scoring or winning deals, they need some ‘coaching’.
That’s where a good advisor comes in. Often, I see business leaders waste time when a deal is warm to get back to potential buyers with basic information that they request. Too often business owners don’t even have access to the basic information and this wastes time putting something together at short notice – still taking too long to respond and when they do eventually respond, providing information of sub-standard value and quality all having the potential to hurt the sale.
The process of getting your business ready for sale can be complicated and time-consuming, which is why it’s important to have the right advisors. Appointing the right specialists to help you identify areas of risk, where your business needs improvement, developing a plan to address those areas, and working with you to implement those changes is key to achieving the best valuation possible for your business.
A part-time CFO or “fractional” CFO is an option worth considering as it provides you with a highly experienced senior CFO with ‘real-world experience’ for a fraction of the cost of a full-time CFO. In particular, your fractional CFO will help you to ensure that your business has planned and prepared for an exit. They will ensure that your sales process is managed in an efficient way to minimize challenges on price and prevent advisors’ fees from eating up too much of the sale price. They can also help you achieve the freedom you want after the efforts you have invested in growing the business. A successful exit can be very rewarding, but planning is critical to maximizing overall value. By planning ahead, you will be able to sell faster, for more money.
You need to spend money to make money – that’s the rule of the game
Your first instinct is probably to throw me under the bus here – because this guy just wants to make a quick buck. Not really. Did you know that facilitating a sale requires on average about 2,000 hours to set up and see the transaction through? With that being said, the one thing that makes your business valuable is to find ways to improve your future cash flows.
As I’m sure you can see, all of these activities take time. If you had to remove focus from the business for that amount of time – and utilize key players in the business to help you, you are setting yourself up for failure.
You should be prepared to spend anything in the region of 4-10% on professional fees to sell your business – depending on the size and complexity of your business – which is really not a lot if you consider that a good consultant will make sure to negotiate a deal that will cover his or her costs.
On your marks, get set, go!
Ensuring you always have an updated company profile, basic information memorandum of the company that includes a recent valuation of the company and updated financials and tax clearance documentation are key to be able to respond to unsolicited approaches.
Ask any South African, the most important part of the game is the pre-drinks or ‘braai’. Successfully selling your business, after you’ve done all the groundwork, boils down to one final thing – the connection between the buyer and the seller. Unfortunately, there are no online dating sites for M&As yet, but by following this advice from lessons learned along the way, you will be better prepared to make that exit when you are ready.
Andrew Meerburg is a Corporate Finance Specialist based in South Africa and is one of worldwide team of 750+ CFOs at The CFO Centre. As with all of our CFOs, Andrew is highly experienced and passionate about helping businesses grow and achieve maximum exit value. Andrew’s particular focus is on the buy and sell side advisory services, exit planning, finance raising, valuations, etc. An exit is an inevitable part of owning and running a business. Ensuring you prepare early will help you achieve the maximum valuation for all your hard work. Get in touch if you’d like to hear more about how we can help – www.cfocentre.com/us
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Author: Andrew Meerburg, The CFO Centre
