Trade Sale
M&A and Strategic advice from business owners to business owners
When you sell your business to another company, it can be referred to as a ‘trade sale’ – the acquiring company is usually in the same or a complimentary sector but also can be from a different industry who see an opportunity for growth or synergies from a combined business.
The buyer can be UK based or overseas, and understanding their business, culture and why they find your business attractive is important for transactional negotiations and value enhancement.
If you’d like to speak to us, please don’t hesitate to get in touch and book an initial business strategy assessment.
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The benefits of a trade sale?
Typically, the key benefits to the shareholders of selling to a trade buyer are value, consideration split and ‘walk away’ timescale.
Value: A buyer in the same or similar industry can have many different motives for acquiring that can lead to them valuing the business more highly than in other transactions. For instance, they may want to eliminate competition or achieve many cost savings and synergies post-transaction from duplicated costs, streamlining processes and purchasing power.
Consideration split: A trade buyer will likely have better access to cash resources either from their own Balance Sheet cash or have a greater ability to raise new debt ‘vs’ a Management Buy out or other exit routes.
Walk away timescale: Trade buyers will likely have the expertise in your sector, it may therefore reduce their reliance on you to remain in the business for a long period of time to help transition. This may therefore mean that you can exit your association with the business sooner than other options such as PE investment, a MBO or an EOT.
Our advisors will work with you to discuss your exit options, prepare your business for a sale and deliver the transaction on your behalf. By using us as advisors, you can benefit from many years of experience to help drive value, including creating competitive tension.
What do you need to consider with a trade sale?
Whichever exit or succession route you decide, there are many considerations that business owners will need to make. Some more common considerations for a trade sale include:
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Business disruption: Transactions take up your time and require detailed information on your business. CN Strategic Advisors can help to minimise this through our effective project management
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Sharing sensitive information: It is important to consider what information is appropriate to share and when during a process. If selling to a competitor, it is important to consider the impact of sharing commercially sensitive information
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Staff & legacy: Different exit options will likely have different impacts on staff and your legacy. Ensure you are fully appraised with the nuances of different exit structures and what a potential buyer is planning to do with your business post-transaction
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Emotive challenges: Your business is a big part of your life. It is important that you are selling for the right reasons and have the right advisors to ensure you are driving the best value
What’s next if you would like to pursue a trade sale?
If you are considering a trade sale for your business, we recommend speaking with CN Strategic Advisors as early as possible to:
- Understand your objectives and rationale for sale
- Provide you with visibility of exit options and an indication of value
- Help close any valuation gaps (if needed)
- Assist in preparing the business for sale
- Deliver a successful trade sale or alternative exit transaction for you
