Great deals might be defined by disruption, but getting a deal done is often governed by stability.
While it might be a sellers’ market right now in Yorkshire, with a lot of money chasing good management teams with credible growth plans, some vendors may struggle amidst such uncertainty.
As we reach the business end of Brexit, the current political and economic conditions might frustrate efforts to get deals over the line. So, if a business wants to make the most of attractive company valuations that are being commanded in the market right now, what’s the secret to getting a deal done quickly?
It is all about three areas of focus; doing the simple things well, boxing off Brexit preparations and making a small adjustment to your strategic approach.
Completing a transaction in a tight time frame requires fastidious attention to detail and good planning, but also an appreciation and reminder of the underlying reasons why the business is valuable and should be an acquisition target.
As such, vendors need to articulate a business’ points of difference and defensibility, show that they have a good plan for delivering shareholder value in the future and have a management team capable of delivering that plan.
Quite simply, all the resources of the buyer should be focused on ironing out the complexities of the deal, not trying to understand the basic proposition.
On a similar note, any distractions that take attention away from the deal will slow down the process. That means conducting some good corporate housekeeping to tie up any loose ends, such as cash flow problems, litigation, management team gaps and onerous commercial commitments.
That also includes distractions from speculative buyers. These ‘tyre kickers’ can drain a significant amount of time and resource from already stretched teams.
Only entertain the approaches of buyers and investors that can make a real offer. To do this, challenge the interest early on and consider getting some help to filter approaches. Don’t forget that when determining credibility, it isn’t just about whether the buyer is right for you, but also if you think that your business is right for them.
Businesses should use the deal making process to get their Brexit contingency plans in place, so they can capitalise, defend and mitigate whatever might occur over the coming months.
This might mean securing medium-term funding facilities, looking at alternative domestic supply chains, taking up forex hedging positions, building up buffers in stock, setting up frameworks to support and incentivise employees and consider alternative product or service propositions, should there be a need to reconfigure. And, of course, conducting some scenario planning to stress test all these initiatives to instil confidence.
Contingency planning might seem a matter of course for operational stability. But, from a deal making perspective, it is also a great chance to show any buyer that the management team can deal with major external events, whatever is thrown at them.
You can do all of that; get the basics right and sort out Brexit contingency planning, but the nature of the deal may be different to what you expected when you come to sign.
Any transaction that is happening amidst such political and economic change will no doubt be subject to negotiation and see calls to safeguard positions in contracts.
Buyers will want match certain considerations with outcomes – writing in the ability to protect themselves against downturns, or otherwise, in trading.
Therefore, it is important to adjust your negotiating strategy slightly and be a little more flexible. Doggedly stubborn positions, on either side, won’t help bring understanding and the parties together.
Fortunately, a strong and robust strategic rationale for a deal will almost always outweigh uncertainty and any other factor that might derail it. You only need to look locally at the likes of PepsiCo’s acquisition of Pipers Crisps, or William Jackson Food Group’s deal with olive oil brand Belazu to see that great deals are still getting done in the region.
So, for any Yorkshire business owners looking to sell up, but are hesitant – be brave. Take confidence that the market dynamics are in your favour. If you can focus on the simple things, prepare well and be flexible, there isn’t any reason that you can’t get a deal done in the coming months.