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How to maximise your business’s value

By Francois Otto, Head: Corporate Finance, Sasfin Capital

As a business owner, you have invested considerable time and effort into building your distinctive company making it one of, if not the, most valuable assets you own. By devoting these intellectual and monetary resources you have created something of worth but is your business meeting its true potential? The time has come for you to optimise and realise the value you’ve created.

When businesses reach this level of high industry-perceived performance, strategies should be put in place to maximise opportunities and gain the deserved value.

Realise value

In order to capitalise and obtain the greatest value for your business, there are two key options, where appropriate.
  • Sell your business: Whether you have decided to relocate, retire after a dedicated career, begin a new business venture or simply want change, selling your business at this time to the right buyer can provide you with maximum returns. Selling a business is not only about finding the correct price, but also about finding a buyer who meets your requirements, in terms of both finding worth in the exchange and certainty of completion of the deal.
  • List your business on the Johannesburg Stock Exchange (JSE): Your company is productive and seen as a leader in its industry. While examining your desired growth strategy, you require more capital to further what you have started. In this situation, the most promising growth may be achieved by placing your company on the stock exchange and allowing public capital to enhance your company’s expansion. Entering the public market requires regulation, compliance and ordered processes.

How and where to start?

Deciding to take your business to the next level requires time and expertise. Maximising the value of a business is best achieved through a partnership. Sasfin Capital understands entrepreneurial businesses and is one of the only banks dedicated to serving clients in the entrepreneurial space. Additionally, Sasfin Capital aims to unlock the unique price of your business through a robust discovery process.

As Sasfin Capital is also a JSE-approved sponsor, we are uniquely placed to advise you in respect of taking your company public, should this be a viable option for your business.

Partnering with a specialist allows the processes to run smoothly and efficiently, with minimum time taken from your daily business operations. Sasfin Capital will guide you on how to best access value in a way that is specific to your business and industry through a rigorous proprietary selling process designed to maximise value for shareholders.

Securing added value for your company can come with risks when done incorrectly or with the most qualified advisor or business broker. There can be no shortcut in avoiding potential risks. Partnering with Sasfin as an expert advisor guarantees not only our years of experience but also the backing of our brand behind your company. We do not rely on upfront monthly payments, but focus our attention on deal completion and not deal attainment.

When approaching parties for assistance asking when they require payment can be a determining factor on whether the completion of a deal will be successful. Additionally, lucrative parties – buyers and sellers – are attracted to working with companies when they can be assured that they are backed by a trusted partner. This allows you connect with elite prospects that you may not have been able to access before.

What distinguishes Sasfin is our approach of taking clients from the beginning of the process through to completion in terms of how we tailor our approach to suit your unique business.

Planning and preparation

If you immediately proceed with selling your business in its current condition and to one buyer directly, you will most likely sell your business for considerably less than it is worth. You can, however, minimise the risk of doing so, and ensure that you maximise the value you obtain for your business through appropriate planning and preparation. During this phase, it is important to address any shortcomings and weaknesses which could potentially detract from the business’s’ attractiveness to potential purchasers.

The key areas a prospective purchaser would examine before purchase are business operations, key business risks (e.g. limited customers, key supplier risk etc.), legal conditions, financial performance and position, business image, products and customers. Therefore, the key areas of examination are critical to get the business’s foundations in order before negotiations with a purchaser can commence. This would include inter alia, making sure that:

  • The business’s tax affairs are up to date;
  • All statutory records are available and up to date;
  • The annual financial statements are up to date and audited;
  • The monthly management accounts are accurately prepared and timeously available;
  • Long-term supply contracts and/or customer contracts are up to date and are in place;
  • Long outstanding debtors are managed; and
  • The business’s website is up to date.

Minimise deal risk and maximise value

Once you’ve ensured, through systematic and specialised analysis, that your business is “sales ready”, you now need to unlock this value. The optimal way to unlock maximum value as the seller is to engage an experienced adviser who should, in most instances, advise the seller to sell the business through a structured auction process. An auction process would entail a wide variety of appropriate and interested purchasers being approached and invited to bid for the purchase of the business.

The advantages of an auction process are: 

  • The element of “competition” between the bidders would unlock value. Anyone who has ever had to go through the process of bidding on a tender or for any request for proposal should understand why this forces potential buyers to “sharpen their pencils”;
  • Should a competitor wish to acquire your business, the auction process would ensure that a potential purchaser's access to key, sensitive information is controlled; and
  • Through a first-round screening process, only serious bidders would be considered and given access to relevant information.

It is crucial that you engage with an expert adviser to assist you in the auction process.

The adviser would assist you with: 

  • Preparing the business for sale by providing advice on areas of weakness that need to be addressed;
  • Helping you identify strengths and synergies with potential buyers;
  • Identifying the widest possible pool of both trade and financial buyers to ensure maximum value realised by the selling shareholder. Sasfin has a proprietary database of potential buyers and an international network of investment banks representing potential buyers that increases the likelihood of finding the right buyer for your business;
  • Preparing an information memorandum on the business for dissemination to potential bidders;
  • The buy-side due diligence process;
  • Assessing bids; and
  • Negotiating with the successful bidder.

If you would like to establish your strategic alternatives for your business, we would welcome the opportunity, on an obligation free basis, to engage with you to assess your business’ readiness to be sold or to be listed and to provide you with advice relating to preparing your business for sale or listing.