David, who joined a panel of experts on mergers and acquisitions at the recent Glazing Summit conference, also called for them to be ‘straightforward’ with their figures to aid the process of selling their business.
Sharing his experiences of buying and selling almost 20 companies in the fenestration industry, David said: “Investors need good reasons to buy a company, so the first step for any vendor is to spend time examining their own business model before they even put their firm up for sale. At this stage, they should ensure that they have the right products and management team in place to add maximum value to their organisation and make it more attractive to buyers. Essentially, vendors need to ask ‘why would someone want to buy my business and what is the risk to the business when the vendor steps away’?
“In a flat market, you must be very clear where the value lies in your business. The most effective ways for the purchaser to add value after the sale are either by scaling-up the size of the organisation or by introducing more products or customers. Businesses that demonstrate they can fall into one of these categories are safer and more lucrative prospects for potential purchasers on the acquisition trail.
“Just as importantly, vendors need to get their numbers right. No investor wants surprises, so companies must be straightforward with their figures. Around three quarters of deals fail and, in many cases, it’s down to lack of transparency and poor financial forecasting. Remember, companies are not just buying your organisation’s history, they’re also buying its future, so they need to know what to expect.”
In light of the industry experiencing a 30% drop in fabricators whilst the number of installers rises, David and the rest of the Glazing Summit panel also offered practical advice to potential vendors on how to raise their profile in advance of a sale and how to secure the right buyer.
David added: “Selling a business is a huge financial transaction and owners must appreciate that buyers will want to see the long-term potential of that business. For instance, you cannot underestimate the value of your brand and the power of your reputation. Firms should consider their corporate image and spend time engaging with prospects through channels like PR, networking and social media.
“And, finally, you need to get the right funding for your deal, whether it’s finance or private equity. You shouldn’t immediately rule out overseas investors either as they often give a higher valuation on larger scale businesses. The key is to find the right buyer who understands your business and is prepared to offer you the best price for it.”
Customade Group was also a sponsor of the Glazing Summit – a pioneering event, which aimed to tackle the key issues affecting fabricators, installers and glass companies in the window, door and conservatory industry. The conference attracted 400 entrepreneurs, executives and business leaders from across the industry.
Andrew Scott, CEO of Purplex Marketing and Insight Data, who organised the event, added: “The aim of the Glazing Summit was to finally provide a platform for the industry’s most influential business leaders to come together to meet, learn and share ideas and information that will allow them to confidently plan for the future. Judging by the feedback we received it seemed this was definitely accomplished. The support of the Customade Group as a sponsor and David Leng as a speaker showed the relevance and importance of such a major industry conference. David’s insight in the acquisitions debate was invaluable and helped to create one of the day’s most powerful discussions.”
To find out more about Customade Group and its range of products visit www.customade.co.uk.