A strategy to realise the capital value built up in a business is essential for all owners, no matter the size of the company.
There are a breadth of options available to realise capital value – the most recognised being a trade sale or a sale to a management buy-out team. But there are other choices too – a middle ground which doesn’t necessarily involve a full exit and therefore may appeal to owners at different stages of the business lifecycle.
One such option might be for a business owner whose company is on a strong growth path to de-risk their personal position. They could realise, in cash, some of the value they have built up in the company whilst at the same time retaining a significant shareholding to allow them to benefit from any uplift in future value.
Another scenario could involve the retirement of a business partner or family member. This could be achieved by sourcing an investor who is keen to support the transaction, as well as the future direction of the business with both finance and expertise. This might also afford an opportunity to incentivise members of the second tier management team, by bringing them into the equity.
There is a significant amount of private capital available looking for a ‘good home’. Thus, for SMEs like those in the Top 100, there are plenty of opportunities. The capital available comes in many different forms and can be used to support an ever-growing range of possible transactions, now more so than ever before. It’s therefore a good time to explore the routes available by working with corporate finance and tax advisors to help put in place structures which provide a successful outcome for the shareholders.
Some business owners may be reluctant to engage with providers of capital as it means bringing in a third party, but in our experience, many such providers are patient, intelligent investors who work hard to support the investee company. They generally provide oversight and strategic assistance as well as opening up their network to the business owner to support growth and business development. This route isn’t right for everyone, but there is often a suitable solution out there, and finding the right individuals to be involved with your business is as important as finding the right capital solution.
By Andy Haigh
Director, BHP Corporate Finance