‘Invest the time early to create a strong sale value’ – Johnston Carmichael

Business owners considering a sale should give themselves two years to get their company in good shape and maximise the value, according to accountancy firm Johnston Carmichael.

Andrew Ewing, the firm’s head of corporate finance, said owners were often too focused on doing a deal quickly with the ultimate result that values were eroded once an agreement was struck with a buyer.

In the calendar year to date, Johnston Carmichael has been involved in 32 deals with a combined value of £242 million.

Mr Ewing said: “Business owners tend to be spinning umpteen different plates at once and that often means they don’t have time to focus on the details which might seem small but can make a big difference in a deal.

“Value can leak out of a business in all sorts of ways, and our message to owners thinking of a sale would be to start planning it at least two years in advance to provide enough time to prepare the business properly.”

Mr Ewing, who acts primarily for businesses in Scotland’s central belt, said senior executives regularly underestimated the value of their external relationships, which could be lost to the business post-acquisition if sufficient transition plans were not put in place for the new management.

He also said unsigned contracts or – in some cases – relationships not covered by any kind of contract would also be a factor for prospective buyers and likely to dilute sale values.

In other cases, property held by the business but intended for use as personal assets – eg as a pension pot – should be considered prior to any deal negotiations beginning in earnest so as not to cause unnecessary delays further down the line.

Mr Ewing added: “There’s an understandable tendency to focus on the end result rather than the preparation – it might seem fussy or unnecessary but we want to see owners realise appropriate value for the risks they’ve taken and the work they’ve committed in creating a strong business.

“Like most things, preparation is the key and by committing a little time and effort at the start of the process, and thinking about it early, business owners can ensure a smooth transition to the new owners. That’s good for the future health of the company and its staff, and helps to create the sort of value most owners want to realise from a sale.”