Selling a business
Discussion
Hi all,
Looking for advice on potential business exit / acquisition
My wife and I own a UK technology business with turnover around £1m+. We acquired the business a few years ago and have grown and modernised it considerably since.
We’re profitable, have a good mix of recurring and repeat revenue, a long established client base and relationships with some significant UK businesses.
We’re now starting to explore what the next stage looks like for us. We’re not formally putting the business up for sale, but we’d be open to the right strategic acquisition or merger opportunity and would like to start having conversations with people who understand this part of the market.
We’ve already spoken to a larger corporate finance adviser, which was useful, but their fee structure is really aimed at much larger transactions.
Has anyone here sold a technology/software business in the £1m to £5m valuation range, or worked with an M&A adviser who specialises in businesses of this size?
Equally, if anyone works on the buy side and regularly looks at UK technology businesses of this profile, I’d be interested in having a confidential conversation.
Not looking to plaster the business across broker databases at this stage. More interested in speaking to the right people, understanding our options and seeing what might be out there.
Happy to share more privately.
Looking for advice on potential business exit / acquisition
My wife and I own a UK technology business with turnover around £1m+. We acquired the business a few years ago and have grown and modernised it considerably since.
We’re profitable, have a good mix of recurring and repeat revenue, a long established client base and relationships with some significant UK businesses.
We’re now starting to explore what the next stage looks like for us. We’re not formally putting the business up for sale, but we’d be open to the right strategic acquisition or merger opportunity and would like to start having conversations with people who understand this part of the market.
We’ve already spoken to a larger corporate finance adviser, which was useful, but their fee structure is really aimed at much larger transactions.
Has anyone here sold a technology/software business in the £1m to £5m valuation range, or worked with an M&A adviser who specialises in businesses of this size?
Equally, if anyone works on the buy side and regularly looks at UK technology businesses of this profile, I’d be interested in having a confidential conversation.
Not looking to plaster the business across broker databases at this stage. More interested in speaking to the right people, understanding our options and seeing what might be out there.
Happy to share more privately.
Yes, we're both involved in the business, but we have a strong leadership team in place which reduces the reliance on us day to day.
In terms of multiple, we're keeping an open mind. We've had some initial professional advice around valuation and indicative multiples, but at this stage we're more interested in understanding market appetite and having the right conversations rather than setting a fixed number.
In terms of multiple, we're keeping an open mind. We've had some initial professional advice around valuation and indicative multiples, but at this stage we're more interested in understanding market appetite and having the right conversations rather than setting a fixed number.
You’re right to avoid volume brokers and to take your time, at this stage.
It depends upon whether this is a tech business that is high growth and therefore can sell for multiples of revenue , or whether it’s more of a steady IT type business. Nearly every business likes to label itself a tech business , but some are more than others!
The reason is that if it’s more of the latter , a regional accountancy business with a CF department may be able to deliver in that size .
You may also have an awareness of potential buyers so the fact they don’t have deep seated sector expertise is less of a concern .
Your local lawyer may have insights into such firms.
No need to answers these questions publicly , but food for thought.
To put in perspective, it’s often harder to sell a £3m business than a £50m.
EOTs have been a popular route for individual vendors , but sounds like that may not work . Is it a question of management’s capability or their willingness/ability to fund, as vendor loan notes are popular to bridge the funding gap.
It depends upon whether this is a tech business that is high growth and therefore can sell for multiples of revenue , or whether it’s more of a steady IT type business. Nearly every business likes to label itself a tech business , but some are more than others!
The reason is that if it’s more of the latter , a regional accountancy business with a CF department may be able to deliver in that size .
You may also have an awareness of potential buyers so the fact they don’t have deep seated sector expertise is less of a concern .
Your local lawyer may have insights into such firms.
No need to answers these questions publicly , but food for thought.
To put in perspective, it’s often harder to sell a £3m business than a £50m.
EOTs have been a popular route for individual vendors , but sounds like that may not work . Is it a question of management’s capability or their willingness/ability to fund, as vendor loan notes are popular to bridge the funding gap.
JonPH said:
EOTs have been a popular route for individual vendors , but sounds like that may not work . Is it a question of management s capability or their willingness/ability to fund, as vendor loan notes are popular to bridge the funding gap.
SoftwareDev said:
We have approached the team, as a group they are not keen. One or two individuals are, but ideally we would need a few more to really make it work.
Company I now run became Employee-Owned (low7-fig turnover) and pay the founders from trading/revenues. A more typical management buyout had been discussed previously and there wasn't the funds/appetite for this. We got some great advice from Postlethwaites solicitors. Thanks JonPH and 22, both really useful replies.
We gave the MBO and EOT route some proper thought over the weekend and have decided it's not the right fit for us. The structure of an EOT, with consideration paid out of future trading over a number of years, doesn't really suit what we're looking to do next. Good to understand the option properly though, so thanks for taking the time.
We gave the MBO and EOT route some proper thought over the weekend and have decided it's not the right fit for us. The structure of an EOT, with consideration paid out of future trading over a number of years, doesn't really suit what we're looking to do next. Good to understand the option properly though, so thanks for taking the time.
SoftwareDev said:
Thanks JonPH and 22, both really useful replies.
We gave the MBO and EOT route some proper thought over the weekend and have decided it's not the right fit for us. The structure of an EOT, with consideration paid out of future trading over a number of years, doesn't really suit what we're looking to do next. Good to understand the option properly though, so thanks for taking the time.
We should possibly have a chat. Just completed an IT merger 3 months ago and looking for other opportunities now, plus can give you some pointers. PM me if you want to set up a call.We gave the MBO and EOT route some proper thought over the weekend and have decided it's not the right fit for us. The structure of an EOT, with consideration paid out of future trading over a number of years, doesn't really suit what we're looking to do next. Good to understand the option properly though, so thanks for taking the time.
I have built and sold a software company. The figures were larger than yours but within the general ball park.
We did not use a broker we did it all ourselves. Lawyers bill was also small.
We believed a quasi competitor would buy us and formed alliances some years before. Of the 3 one we fell out with. The other two completely independently approached us to buy at almost the same time.
I am happy to talk off line as to our experience but I would at at this level you are likely to sell to someone you know and who knows you.
We did not use a broker we did it all ourselves. Lawyers bill was also small.
We believed a quasi competitor would buy us and formed alliances some years before. Of the 3 one we fell out with. The other two completely independently approached us to buy at almost the same time.
I am happy to talk off line as to our experience but I would at at this level you are likely to sell to someone you know and who knows you.
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