Q: Should I use a Business Broker to sell my company?

A: According to AccountingWeb.co.uk the big UK business brokers manage to sell less than 10% of the business on their books. Smaller business brokers sell less.

The main revenue stream of the business brokers is the fee the business owners pay in order their business to be listed. The business brokers have less interest in selling the business as it is a time consuming and hard work.

Another issue with the business brokers is that initially their sales person (the front-office) promises you that they can sell your business at a high multiple of EBITDA, so you sign the exclusive contract with them and pay them the fee. However, the back-office then struggles to sell the business at this high price and comes back to you to reduce your price down.

Another downside of using a business broker is that when a potential buyer makes an offer to the broker, they pass it on to the seller and if they reject it, the buyer is informed about the rejection. The broker does not allow the parties to have a direct discussion and find out how far or close are their expectations about price and terms. The buyer usually moves on.

As a contrast to the business brokers, we at Maxea Group, focus on your needs and expectations. We listen carefully what you want to achieve with your exit, valuation, time frame and conditions, and prepare custom-made solutions for you. Our aim to achieve a Win-Win-Win situation for you - the seller, for us – the buyers, and for the business.

Q: Should I sell my business to a Trade Buyer?

A: A Trade Buyer (a larger business in your industry) will be mostly interested in getting your clients and contracts and absorbing them into their existing structure. Most likely some of your existing staff, who helped you build the business over the years, will be made redundant. Your company legacy will be lost as the larger business will introduce their company culture, brand name and processes.

Q: Should I sell my business to a Private Equity company?

A: A Private Equity company may acquire a business if it is of certain size, in average above £8m EBITDA. They also have a strict set of rules, like all the management staff to stay in place…

Q: What is the professional background of your CEO?

A:  Our Chief Executive Officer (CEO) is Mark Johnson.

With over 20 years; experience in business analysis and business consulting, Mark has improved businesses in a wide variety of UK industries – Manufacturing, IT, Telecoms, Finance, Insurance and Automotive, to name but a few.

Some of his most popular clients were BT, O2, Vodafone, Virgin Media, Verizon Telecom, Racal Telecom, NOKIA, Coutts Bank, BUPA, StatPro, BMW Financial Services, Honda Finance Europe, British Car Auctions, Specsavers, Amdocs, Logica, Reed Exhibitions Plc, Feedback Ferret Ltd, Aegis Media Group and Unisys.

The business improvements which Mark made for a particular client, resulted in winning a $5,000,000 contract with Volkswagen Group of America.

Mark has not only been a business consultant, but also a serial entrepreneur and he has founded, grown and successfully exited companies.

He has also been providing consultancy services on merges and acquisitions. Mark personally has bought, improved, scaled up and sold companies.

Q: Why are you interested in buying my company?

A: We are currently acquiring profitable companies in the manufacturing and engineering industries as we are building a group. Our group is a platform where we provide additional resources (management, finance, HR, marketing, etc.), which help the individual business keep their existing legacy, all the staff, improve and grow.

Q: How will you finance the purchase of my business?

A: We invest own funds and arrange commercial lending. The deal structure is tailored to suit your needs and usually will include an initial consideration and a deferred consideration over an agreed period of time, and will consider the tax efficiency for you.

Q: How long does it take to complete an acquisition?

A: Every deal is different, however, an average acquisition can complete in a period of  12 weeks. Usually, the delay is caused by the seller, when the requested by us information is not provided on time. We have  in place a very experienced acquisition team and a completion within 12 weeks is easily achievable.

Q: What happens with the business once it is sold?

A: We are buying businesses and building a group. We are not asset stripping businesses. When we buy a business, we keep its name, structure, employees, etc. Our policy is to keep the legacy of the business we acquire and grow it further.

After the acquisition, the management of Maxea Group will work closely with the management team of the business, and together we will create a strategic plan, which will include the various departments, e.g. Accounting, Finance, Marketing, Sales, HR, Operations, Technology, Production, R&D... If necessary, Maxea Group will provide funding for new plant and machinery, marketing, recruitment of additional staff, etc., in order to accelerate the business growth and expand into new markets. 

Q: How do you value a company?

A: Valuation of a business is a quite subjective. Our valuation is based on the value of the assets of the business, a multiple of the net profit, the business potential revenue, market trends, etc. In order to value your business, we need to understand it first and because of that we do a detailed due diligence and use our acquisition expertise.

If you already have a valuation of your business by a business broker, we will not use that valuation but do our own due diligence. We know for what multiples businesses are selling in certain industries and we will provide a realistic valuation. Our goal is a win-win situation in which you are happy with the valuation/sale price and we are happy with a realistic timeframe for the return of the investment.

Q: Do you buy non-profitable businesses?

A: This could be an option, however, at the moment we are looking to acquire profitable business.

Q: Do you invest in other people’s businesses?

A: At the moment we are looking for acquisitions only, in which we buy 100% of the shares of the company and have a full control of that company.

Q: What happens with the cash in the business I am selling?

A: It depends on the particular situation and an accountant can advise. Here is an example for illustration purposes only. If you have £250,000 in the bank and want to take it out before the sale of the business, you have 3 options.

Option 1: you withdraw the money as a salary and pay 43% taxes = £108,946.

Option 2: you withdraw the money as a dividend and pay 39% taxes = £97,588.

Option 3: here comes in play our acquisition expertise and we can suggest different scenarios. One is to take the money as a part of the deal (e.g. the initial consideration) and using the Entrepreneur’s Relief (now called Business Asset Disposal Relief), you pay only 10% tax = £25,000.

£108,946 - £25,000 = £83,946. In this example you will save £83,946 if you receive the cash as a payment for the sale of the business, in comparison to when you take the money as a salary.