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Getting Started

Finding an overseas buyer

When it comes to selling a UK business, market it internationally to get the best deal

Finding an overseas buyer

It’s a good time to sell your business because the weak pound makes UK-based entrepreneurial companies an irresistible bargain for foreign buyers. At least, that’s the received wisdom. Yet, while currency values may make UK businesses cheaper to acquire in absolute terms, corporate finance specialists say it’s neither clear-cut nor the only factor attracting overseas buyers. Irrespective of the pound, they emphasise that international and overseas companies like the UK market anyway. It’s an easy place to do business, has a large economy, relatively low tax, is open to inward investment and actively encourages entrepreneurial flair and creativity. Universally, they agree entrepreneurs looking to exit must reach out globally to potential buyers to get the best price, using professional support.

Sectors in demand

Currently the UK’s fin-tech, industrial technology, business services, retail, consumer and real estate sectors continue to attract overseas purchasers. Additionally, strong interest in healthcare, sports, insurance, and specialist retail businesses along with companies specialising in precision engineering and enterprise software is being reported by sell-side specialists. Brand-based companies with intellectual property rights are particularly appealing to the Chinese.

Nicholas Stone, Director of Alaris Corporate Finance, says: “You cannot sell a business these days without looking at international buyers. The weak pound is a positive factor giving those buyers more firepower, but equally the currency situation may create a rising cost base that counters that.” He argues that before selling, entrepreneurs must research  and evaluate the economic cycle their own sector is in to ensure “there’s still petrol in the tank”. 

“Avoid talking to direct competitors initially. First, speak to people in international markets wanting to get into the UK and those in allied sectors to get a feel for potential interest in your business,” he says. “Selling a business is all about identifying potential buyers and developing dialogue, and that involves serious ‘heavy lifting’. So, I’d recommend approaching advisers with proven international sales success and access to sales networks in other countries.”

Seeking an edge

Doug Harmer, Co-founder and Partner of London’s Oakwell Capital agrees with that approach, bearing in mind overseas organisations are increasingly looking internationally for acquisitions. “They’re seeking businesses with ‘an edge’ offering opportunities in potential new markets or those with UK distribution they don’t have. For example, US companies are now interested in UK small cap insurance companies worth less than £50m.” He adds: “Overseas buyers really scrutinise the quality of management teams in companies they’re interested in – I cannot stress enough the importance of having good managers in place.”

However, Doug believes the weak pound’s positive impact on acquisition prices is countered by worries that continuing currency falls could impact the value of the target business, leading bidders to postpone their acquisition decisions. That concern is echoed by Mark Carmichael of City-based Tower Corporate Finance. “It’s not a given that a weak pound makes UK business more attractive – it’s a sound bite. Yes it can help, but the situation’s complex. “Nor is it true there’s been slowdown in interest from Europe since brexit, or that US companies only seek big deals. For example Google Venture Capital will look at buying nimble start-up UK businesses at around the £5m mark.”

Mark, Head of Corporate Finance and author of The Intelligent Exit, adds: “When I was a young entrepreneur I tried to sell my businesses myself and was not as successful as I’d hoped. “Entrepreneurs need someone with an international presence to negotiate on their behalf. Go to a broker or consider an investment banker for a mid-level transaction up to about £250m. Just never, ever go it alone.”