Increasing the value of a business
Our client, the owner of a small IT support business, was more of a technical guru than a business person. It was not until he contemplated selling the business that he realised the desirability of the contracts to other IT support businesses eager to expand. Through working with us, he achieved offers far beyond his original expectation.
Our key tasks were to value the business, implement a marketing strategy that demonstrated this value to prospective buyers, and find him a buyer.
What we did
We first analysed the current business situation and prepared a valuation report that looked at the various methods of calculating the value of the business. The element of revenue that was generated by the contracted maintenance and support services was key to the valuation, as the contracts represented a tangible revenue stream for the future. We advised on the type of offer and deal structure that the client could expect.
We then prepared an extensive sales memorandum that highlighted all the selling points of the business and the details of the contracts that buyers would want to know, such as:
- duration of contract
- notice period
- key terms of the services offered.
We also looked at how the client relationships and ongoing business could be practically transferred from the seller to the buyer post completion.
Clarity of information is key to driving a prospective buyer to make a decision. If the description of what is being bought is not clear, and answers to buyers’ questions are not forthcoming quickly, the decision will be negative. Working with the owner, we put together a clearly presented package that could be provided to buyers as soon as they asked the questions.
We then started our marketing campaign of direct approaches to companies identified as strategic buyers, consultation with our network of advisers and database of buyers, and advertising. Having qualified the buyers regarding their intentions, means of funding and acquisition search criteria, we arranged and attended meetings with the client. All buyers signed confidentiality agreements before we revealed the identity of the company and any confidential information.
Within two months we had presented the business to over fifty interested parties. We set a date for offers and received eight. Several of the buyers resubmitted their offers in a bid to be accepted. The most promising buyer was selected, and it was announced that their letter of intent had been accepted.
The best offer exceeded the owner’s expectation by almost 100%. However, in view of this success, the client decided to build his IT support company further in order to gear up the business to achieve a significantly higher value in the future.