Selling Your Business? Perhaps the Sale Isn't the Most Important Decision
By Martin Blyth, Founder of Link Independent
For many business owners, selling their company represents the culmination of decades of hard work.
Long hours, financial risks, difficult decisions and, hopefully, a few successes along the way.
Then one day someone wants to buy it.
Perhaps it's a competitor, an investment group, the management team or simply someone who sees an opportunity in what you've built.
Naturally, one of the first questions is:
“How much is my business worth?”
But there's another question I think is equally important:
“What do I actually want the sale to achieve?”
Because the two aren't necessarily the same thing.
Do you actually want to sell?
Imagine you've spent 20 or 25 years building a successful business.
It's now worth £5 million and someone offers you £5 million for it.
Great result.
But what happens next?
Perhaps you don't actually want to retire. Maybe you'd like to release some of the value you've created but remain involved in the business.
Perhaps you'd like to reduce your responsibilities while retaining an interest in its future growth.
Maybe you'd like some capital now, but also want what you've created to benefit your children and grandchildren in years to come.
And what about the buyer?
They may actually value your continued involvement, experience and relationships rather than wanting you to disappear the moment the transaction completes.
Suddenly, “sell the company and take the money” isn't necessarily the only conversation worth having.
Ownership, control and value don't always have to be the same thing
This is where things become interesting.
We naturally tend to think about business ownership in fairly simple terms.
You own the shares.
You sell the shares.
Someone else owns them.
You receive the money.
But more sophisticated business and ownership structures can potentially allow control, economic participation and future value to be considered separately.
Depending upon the circumstances, that could mean a founder releasing some of the value they have created while retaining an economic interest.
It could mean management participating in future growth.
It could allow an incoming investor or buyer to participate without necessarily requiring the founder to disappear completely.
And it can potentially open a much broader conversation about how the value created by the business might ultimately benefit the founder's family.
That's quite different from simply asking:
“Who's going to buy my company?”
Start with the outcome and work backwards when selling your business
This is something I've increasingly come to believe in across financial planning and business.
We have a habit of starting with the solution.
I want to sell my company.
I want to transfer my pension.
I want to make an investment.
Sometimes it's worth stopping before that point and asking why?
For a business owner considering an exit, I'd start with five fairly simple questions:
Do I actually want to sell everything?
How much capital do I genuinely need?
Would I like to retain an interest in the future success of the business?
How would I ultimately like my family to benefit from what I've created?
And what happens if I or members of my family live in different countries?
The answers might still lead to a conventional sale.
But they might also start a completely different conversation.
Living in France adds another dimension
For British business owners who have moved to France, this becomes particularly important.
You might live in France but own shares in a UK company.
Your children might live in the UK, France or somewhere else entirely.
The business itself may operate internationally.
And suddenly what initially appeared to be a straightforward business sale involves questions around tax residence, company ownership, succession, inheritance and potentially several different legal systems.
France also has its own rules and planning opportunities around the transfer of businesses between generations, including the Pacte Dutreil regime where the relevant conditions are satisfied.
That doesn't mean there's automatically a clever structure everyone should use.
Quite the opposite.
A good structure should solve a genuine problem, not create three new ones.
It's why legal, tax and financial advice in the relevant jurisdictions should form part of the conversation before significant changes are made.
There are more options than many owners realise
One of the more interesting areas I've been exploring recently is the development of specialist equity and ownership structures.
These can potentially provide different ways of thinking about liquidity, ownership, investment, succession and participation in the future value of a business.
They're not going to be suitable for everyone.
Nor should complex structures be created simply for the sake of being clever.
But for the right business owner, understanding the alternatives before signing a conventional sale agreement could be extremely valuable.
Perhaps the objective isn't to sell everything.
Perhaps it's to release enough capital to enjoy the next stage of life.
Perhaps it's to bring in new investment.
Perhaps it's to gradually step away from running the company.
Perhaps it's to create something that continues to benefit the family.
Or perhaps it really is to sell everything, collect the proceeds and head for the nearest golf course.
All are perfectly reasonable answers.
The important thing is knowing which one you're trying to achieve.
Don't spend 20 years building something and six months planning what happens to it
That's probably the thought I'd leave business owners with.
You've potentially spent decades creating the value in your company.
So if you're approaching the point where you're considering an exit, give yourself the time to understand what's possible.
Speak to your accountant.
Speak to your lawyer.
Speak to your financial adviser.
And, particularly if you're living internationally, make sure the people involved understand the jurisdictions that affect you and your family.
Only then decide what the transaction should look like.
Because selling the business and achieving what you wanted from the sale aren't necessarily the same thing.
Sometimes the most valuable question isn't:
“How much can I sell it for?”
It's:
“What do I want everything I've built to achieve?”
Martin Blyth is the founder of Link Independent, an international introduction service connecting individuals, families and businesses with carefully selected financial advisers and specialist professionals. Link Independent does not provide financial, tax or legal advice.
Different is better.
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