JEC COMPOSITES MAGAZINE - Issue #134 - May/June 2020 - 19

strategy BUSlNESS

Selling your business, Part 2:
finding the right buyer, closing the deal
In Part 1 of this two-part series, we highlighted why the composites industry
is attractive to certain investor groups and discussed the first step in FMG's
four step process for owners and shareholders looking to sell their business:
Effective positioning and presentation to those groups.
David Schofield,
Co-Founder and Managing Director
FMG

U

nderstanding
your
firm's fit with these
targets is the key to
achieving the right sale,
and the right deal, for both
parties. In this instalment, we
will consider the final three
steps in the process.
Intelligent research
Develop a roadmap that lets
a potential buyer know your
company, your customers,
your competitors and your
geographic reach. Analyze
where the business is today,
where it could be in the
future, and what financing
will be needed to enable the
transition. A technology/
product development roadmap is a good tool here. If there
is potential for the business
to expand geographically,
look at the regulatory environment for your product,
geography-bygeography, and show its effect
on your competitiveness and
value proposition. You can
create a detailed plan for the
first three years, followed by
a trajectory that shows where
the business could be in five
years. Identify key milestones

that will drive the business
over that time period and
then relate your financial
needs to these milestones.
This roadmap, alongside a
very clear value proposition
and supporting data, is key to
communicating your business
plan to potential buyers.
Ideally, you also should be
able to distil your three-tofive year plan into a couple of
paragraphs. This is rarely done
well, but an external advisor
can add valuable insight here.
Identify, select, and
approach the right buyers
Researching the purchaser's
financial and operational
needs and goals, looking
closely at your value proposition
and
examining
your business from every
angle, good and bad, all
save time and money. As a
player in the high-growth,
technology-driven composites sector, your strong emerging market position is more
valuable to a traditional
trade buyer than to one of
your high-tech competitors.
Your over-stretched local
manufacturing
operations
may mark down your price
to a new market entrant but
increase your value to a buyer

with under-utilized overseas
plants. Investors with strong
finances and well-founded
strategies will seek to leverage
their expertise and assets to
make improvements. Your
high cost base may worry you,
but it could be an easy-to-fix
opportunity for a private
equity investor that is adept
at efficiencies.
With the composites market's
worldwide attraction, advisors that can combine strong
market insight and cross-border expertise will prove to
be the most effective with a
truly global buyer universe
to select from. Finding the
best buyer is, however, about
more than plugging into an
advisor's network. In FMG's
experience, the best value
for both parties is achieved
by understanding that every
business has a very different
worth to each potential
owner, based on the strategy
each has adopted. Most trade
buyers and, certainly, private
equity firms, clearly articulate
why they are buying and what
criteria they use. It may take
work to determine the price
they place on each criterion,
but that's a job for you and
your advisors.
N°134 May - June 2020

Create and manage a
competitive process
Hired hands or DIY?
With management time at a
premium, taking your eye off
the ball to run the transaction
process can often result in
nasty surprises that might not
derail the deal but can result
in significant late-stage price
reductions and aggressive
negotiations.
So, finding and hiring a
dedicated external advisory
to do the deal can be a
sensible policy. But a large,
experienced, advisory team
can be cost-prohibitive for
many SMEs. So what to do?
For most SMEs, a good intermediary - a corporate finance
or boutique investment bank
- with an understanding of
the sector complemented by
an experienced legal advisor
will be affordable and avoid
compromise.
You
must
ensure that the bank and/
or advisor do not hand off
the engagement to less experienced juniors once their
senior teams have impressed
you. Control costs from the
start by setting a clear budget.
A good rule of thumb is 10%
of the likely deal quantum.
Then set a realistic timeframe

/ jec composites magazine

19
JEC COMPOSITES MAGAZINE - Issue #134 - May/June 2020

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