By Rob Garner

Selling a consultancy business – or any business for that matter – isn’t rocket science or a dark art.   But it does require careful planning and execution if you’re going to maximise the capital value of the business, and secure the right buyer.

Let’s consider the selling process in those two phases … Planning and Execution.

Planning

Assuming that your plan isn’t to wait for the right partner to appear from nowhere, selling your consultancy will typically start long before the actual sale process or execution phase.

You need to think of the planning process as three parts:

  • Preparing the business
  • Preparing for the process
  • Researching the market
Preparing the business

You will maximise the capital value of your business if you’ve addressed any lingering issues before you put it up for sale – a bit like how you might renovate your house before you call the estate agent.  Renovating your business means looking objectively at your:

  • Leadership – competency, capacity, and succession
  • Human capital – acquisition and retention
  • Commercial strategy – sales and account management
  • Service execution – efficiency and quality assurance
  • Finance & operations – processes and controls, systems and reporting
Preparing for the process

The timeline for most sales is measured in months and years rather than weeks.  However, preparing as far in advance as possible will enable you to accelerate the process, whilst also maximising the value of your asset.

For example, you are going to be asked to provide a considerable amount of information about the business, most of which you will have, but some of which you won’t.  The majority of the requested information is standard and easily predicted, so if you collate that information into a digestible package with time to spare, it will speed up the process considerably. It will also give any potential buyers an idea of how efficiently the business is run. Using the house-selling analogy again, it’s akin to preparing the seller’s pack before marketing your house.

Researching the market

Who you sell to shouldn’t be down to chance.  You need to research the market for likely buyers and put them into different categories. For example, are you likely to maximise the capital value of the business by selling to a competitor? Or to a new market entrant? Or perhaps even to a client?

Thinking expansively about different categories of potential acquirers will help you to draw up a list of targets. You can then hone your selling message to suit each one accordingly.  The selling message might be about market consolidation, removing a competitor, or for another category of buyer, it might be about complementary services.

Execution

You need to think of execution in two parts:

  • Engaging with the market
  • Completing the transaction
Engaging the market

Either directly or through an intermediary, you will need to reach out to the organisations you’ve identified through your market research.

At first these conversations will be very much “in principal” – “if you’re thinking about…”, “would this be of interest to you?” etc. – before you whittle the field of potential buyers down to the ones demonstrating a genuine interest in acquiring your business.

Under a non-disclosure agreement, you can then share the stock of information you’ve already compiled. You’ll also start to engage in more direct conversations, and at some point, you may decide to enter into an exclusive arrangement with a potential buyer, where they have a little more time and access to the business in order to prepare an offer.

Completing the transaction

Depending on the complexity of your business, you may have a number of strands to the completion phase.

As a minimum you’ll have a legal (Sale Agreement, Warranties, etc), financial (completion accounts, taxation, etc.) and buyer due diligence (akin to a building survey and searches when buying a house) strand. You may also have additional or sub strands that deal with technology, property and people/HR. That stock of information you’ve already prepared will provide the information on all of these strands, but you will also need specialist support.

As with selling your house, you can do your own conveyancing if you really want to, but you’re better advised to use the services of a conveyancing solicitor, so ensure you get good legal and financial support as a minimum.

Most transaction completions take three or more months and can generate inordinate amounts of material to be review, agree and sign. Not all of this can be done by your advisors, so make sure you reserve enough of your own time to fully participate throughout.

If you’re thinking of selling your consultancy and would like help to maximise its value, please get in touch, we’d be happy to answer any questions you may have.