‘Selling your business is a step into the unknown’: Andrew Mason on selling Pentest People

Mason has founded multiple businesses, including RandomStorm, RapidSpike, Data Protection People, Pentest People, and most recently, Dark InVader, which was established to address flaws in the dark web security market.

Mason’s exit from Pentest People, headquartered in Leeds, took a lot of learnings from RandomStorm which was sold to listed business Accumuli in 2014.

“With RandomStorm we never put the business up for sale,” he says.

“We focused on marketing and PR which brought a lot of inbound interest, and we didn’t use a corporate finance house.

“Eventually a company met with us and bluntly said: ‘We want to buy you … how much do you want?’ The four shareholder-founders of the business plucked a figure of £10m out of the air as it sounded good.”

The latest sale took a different approach.

“Pentest People was getting too large for us to manage and we needed someone to take it to the next level,” says Mason.

“This time we appointed a corporate finance firm. We met with around 10 companies and settled on Rothschild & Co as they came in with the Rothschild family name and connections.

“They achieved a valuation of 60 per cent more than we thought we were going to get.

“I honestly believe that if we had used a corporate finance firm with RandomStorm, we would have ended up with more money.”

Mason, who co-founded Pentest People in 2017 with Robin Hill, Gavin Watson and Anthony Harvey, had the exit in mind from day one.

“We built it to sell,” he says.

“And because we’d been through the due diligence process before, we knew what we had to put in place.

“If you’re doing any share transfers or EMI (enterprise management incentive) schemes, don’t do it yourself. Use a proper accountant and lawyer and make sure all the paperwork is correct and signed.”

Mason and the other remaining co-founder Harvey are staying on in the business for up to 18 months as part of an earnout provision.

“We’re now part of a really large group with all the policies, procedures and controls that the staff enjoy,” he says.

“They can see growth better and opportunities for them to move within the business.”

Advisers have their own suggestions on how to make a business as painless as possible, despite all the inevitable emotions wrapped in such a move. Alex Baskeyfield, who is an M&A (mergers and acquisitions) partner at Mazars accountants in Leeds, says: “For an exit to go well, you need a number of factors: business performance, ideally a growing market in which you’re operating in, and strong levels of confidence from the people that will buy into your sector.

"Some of those are within your control.

"If you’re flexible with your timeframe, you can ride out the market lows and then you’ll have a better chance of exiting when the market is buoyant.”

Meanwhile, Jon Healey, head of corporate and commercial for the Yorkshire and Humber region at Raworths solicitors, says that early preparations are a vital ingredient in making a business exit.

“Dealing with due diligence can be a phenomenally taxing process, especially when you’re in the middle of running a business,” he says.

“Sellers should undertake their own due diligence on their business before they open the books up to a buyer so that they can uncover potential issues, find solutions and settle disputes in advance.

“The key takeaway is that anyone who is looking to sell their business should prepare as early as they can and look to get some really good assistance from advisers who have your best interests at heart.”

Marc Allison, corporate partner at the Leeds office of Weightmans law firm, adds that business owners should ensure that the futures of important staff members are considered as part of the process.

“Incentivising key staff is important,” she says.

“For example, I have a client who is looking to sell in five years’ time and they have a key employee who they want to reward as part of the sale, but they’re not a family member and are not going to be a shareholder.

“We’ve talked about an EMI option so that the employee can get the shares just before completion, then participate as one of the sellers and have some of the consideration.”

It all comes against a more uncertain environment for mergers and acquisitions – as well as the global economy as a whole – in the wake of the continuing fallout to Donald Trump’s tariffs announcements.

Peter Rothwell, head of banking at KPMG UK, has recently said advisory functions like deal-making, including mergers and acquisitions, “remain challenged by market conditions”.

Speaking in advance of several major UK banks revealing their latest results last week, he said recent volatility is causing some “paralysis” in the market.

This article originally appeared in Yorkshire Business Insider magazine