The exit market is currently more fertile than it has been for some time. The services and infrastructure sectors, in particular, have seen a resurgence mainly in the areas of health, education and IT.

Growth in the current climate has largely been driven by the private equity community, as houses look to invest their substantial funds in quality businesses. There are huge amounts of funds currently available to private equity houses for investment in M&A and this is backed up by buoyant lending conditions.

In the last year we have started to see a slowdown in some sectors – e.g. retail, but the banking market remains highly liquid with a wall of cash chasing a limited supply of opportunities. Therefore at present there is nothing to suggest this activity will be derailed.

THE RETURN OF TRADE BUYERS

We have also recently seen trade buyers re-enter the market. As stock markets reach record levels and AIM continues to attract a high volume of new entrants we expect the outlook to remain fair.

A trade sale is often viewed as the least expensive and quickest option available. This is also a logical way to approach a deal as a trade buyer will have a better understanding of your business and your market which will assist in speeding up the potential transaction.

However, as with all business transactions there is a risk in approaching your competitors and passing on vital information about how your company operates.

THE PRICE IS RIGHT

One of the keys to ensuring you get the best possible price for your business will revolve around selling at the right time. A key mistake that many business owners make is that they will wait until their business has stopped growing before they think about exiting.

If we examine the current market then generally prices are up, as reflected in the strong stock market. The prices currently being paid for businesses, however, are still largely dependent on the characteristics of the business being sold, i.e. growth opportunities, profitability and market positioning, strength of management and earnings.

Of course, timing is everything and an objective overview of the business should be taken, the industry sector and the overall economic picture to assess if and when it is a good time to sell. Some circumstances make it easier to sell a business regardless of timing – for example, if it operates in a niche market with good contacts or has an excellent customer base.

Other key questions to be considered include the nature of the transaction. Will it be a partial cash-out deal, a full sale or an earn-out, for example? Also, once the deal is done, how will the post-disposal transition be managed? Will the owner be required to continue with the business under a consultancy agreement?

TAKING ADVICE

Just as important – although maybe not quite as interesting – are the considerations around tax issues. While the chancellor has narrowed down the tax planning opportunities, it is still worth thinking about personal tax planning measures for private shareholders. Attention should also be paid to minimising tax warranties and indemnities.

There are so many issues to bear in mind, but staying on top of all of them and maintaining control over the sale process is imperative as value can leak out of the deal when issues get out of hand. Making the right choice of advisers is the first major decision you will make. Ideally, the chosen advisors should be sympathetic to your size of business and to your particular needs. A decent knowledge of the sector in which your business operates is also valuable. You’ll certainly be struck by the number of issues you have to consider and your choice here could well be crucial.