When you’re selling your business the management team is an intrinsic part of its assets and can make or break the sale. While you may have been working with your managers for many years and some may even be shareholders, are they people who can lead the company to a successful exit and beyond?
In most cases you would hope that they are – after all, they got you this far. But preparing for a sale can be a moment when tough decisions must be made and that could mean bringing in new senior people, which can be difficult for the existing team, or even losing some of your less able managers.
Martin Brown, chief executive officer of SME growth advisor Elephant’s Child, explains: “Buyers are obviously looking to mitigate their risks. They need to feel confident all the core people are in place, are sufficiently incentivised and motivated and have the necessary skills and talent to ensure the business can fulfil its potential.”
“With a typical sale process taking 18 months to three years to complete, the foundation stones must be firmly laid first. Once you’ve made the decision, you have to start planning immediately and ask yourself what does it take to drive this business and exit it?”
He says the vital first steps are to have a clear strategic intent for the business outlined in a three-year plan, an operating plan with a budget and a clearly defined organisational structure. “The mix and skills of the team must be able to meet current needs and take the business beyond the sales process. Any gaps can be filled through promotion and development, recruitment or outsourcing.”
“And it’s important to have a clear succession plan in place,” he adds, “not just for yourself, but for all core team members, as people might have to step up if someone leaves. Failure to do this can kill an acquisition or drastically reduce the transaction value.”
Martin recommends getting a business advisor and specialist human resources support on board to minimise disruption by enabling existing managers to focus on their usual roles, and helping you manage personnel issues that could either enhance or damage the sale.
Having the right team in place was essential for the buyers when Dr Anthony Thomson, the man behind the company producing the world’s first wireless electric car charging system, sold his company.
He started his business, HaloIPT, in 2008, to commercially develop charging technology that the University of Auckland had been working on and license it to major automotive component specialists.
In 2010, HaloIPT was incorporated with new investors and business partners on board, including engineering giant Arup. Led by Dr Thomson, it boasted ten young carefully selected engineers, a new chairman and two university professors, acting as contracted chief financial officer and chief technology officer.
“I’d developed the five-year plan, but consulted a panel of ten relevant automotive and tech company experts, such as former General Motors vice chairman Bob Lutz and Chargemaster boss David Martell, to revise, strengthen and refine our strategy,” says Dr Thomson.
Condition of sale
Less than two years later, a consortium led by technology giant Qualcomm, was approached to be an investor but was so impressed with the London-based start-up’s potential, it made a multi-million pound offer for the company, which was accepted.
“A condition of sale was that myself and the team moved to Qualcomm wholesale,” says Dr Thomson. “In fact, most of the original team are still there in senior positions, and I only recently left to become a growth planning specialist advising SMEs.
“Qualcomm’s offer to buy was unexpected, but they clearly thought we had good people on board, and massive potential. This clearly demonstrates to me having the right team and strategy in place definitely makes start-ups attractive to buyers.”
Where the opinions of third parties are offered, these may not necessarily reflect those of St. James’s Place.
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