OPTIMISE PERFORMANCE TO DRIVE VALUE

PLAN FOR THE EXIT JOURNEY
OPTIMISE PERFORMANCE TO DRIVE VALUE
PREPARING TO EXECUTE THE TRANSACTION

A clear and consistent strategy

A clear and consistent strategy, that everyone in your business buys into and works towards, gives buyers confidence that the business can justify its valuation and is able to exploit growth opportunities.

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Acquire for growth

A combination of organic growth and growth by acquisition will optimise the value of your business, but an acquisition must be efficiently integrated to add scale, diversity and earnings.

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Achieve working capital stability and secure funding

For buyers to appreciate the reality of the growth opportunities afforded by your business, you need to have suitable cash and funding resources available to deliver the growth plan. The focus should therefore be on achieving optimal efficiency in the working capital cycle. Steps to accelerate the resolution of payment disputes and cash collection, negotiating better terms with suppliers, and enhancing operational procedures to shorten stock holding cycles will all have a positive impact.

Secure and flexible banking facilities that are aligned with the business’ growth aspirations should be secured for a term that doesn’t expire before the sale. This will spare the management from spending time on renegotiating them with the bank. For the same reason, another area of focus should be the covenants embedded in facilities. Ensuring that they are appropriate given the business’ cash flow cycles is important, as we have often seen facility covenants that are at odds with the business cycle.

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Embed accurate budgets and projections to drive accountability

A robust financial budget and forecast is key for two reasons:

  1. It supports the business valuation by showing potential buyers what the future of your business looks like.
  2. It provides evidence of historic budgeting and forecasting accuracy that instils confidence in the forecasting process.

To be effective, the forecast model must be well structured and underpinned by strong evidence that supports the growth projections. It must demonstrate that there is accountability, control and variance analysis wrapped around a robust forecasting model.

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Engage, incentivise and retain your workforce

A motivated, engaged work force that’s incentivised to achieve the strategic objectives of the business will allow you to optimise value on exit.

But a disengaged work force can lead to under performance and damage the business’s value. Getting the people culture and strategy right will also give buyers the confidence that they’re acquiring a workforce that will unlock the value they expect from the business.

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Power profitable growth

Creating an action plan to sustainably increase profits will help to optimise the value of your business on exit.

The action plan may involve cost reductions, process improvements, product reductions, price enhancements, and customer rationalisation remedies. Once the plan is finalised, it must be rolled out with enough time for it to positively affect the bottom line in a way that the business can prove is sustainable in the long term.

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Put technology and data at the heart of the business

An up-to-date IT strategy and investment in technology is critical to preventing value leakage on an exit. The business’ IT infrastructure needs to be scalable as the business grows and ensure that data and intellectual property is protected. Otherwise, buyers will deduct from the asking price the sum they estimate will need to be invested in technology or walk away because of concerns over critical business information leakage.

Your business systems collect a huge amount of data on a daily basis. Developing a way of interpreting that data to make informed business decisions will drive growth and profitability, thereby unlocking more value in your business.

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The role of tax in securing pre-exit value

Any reorganisation to extract non-core assets or to package the business for sale must be tax efficient. It must also be well documented from a tax technical perspective and HMRC clearances obtained well in advance. Making the most of valuable statutory tax reliefs will also improve the business’ exit value.

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PLAN FOR THE EXIT JOURNEY
OPTIMISE PERFORMANCE TO DRIVE VALUE
PREPARING TO EXECUTE THE TRANSACTION