WHY DIGITAL BUSINESS OWNERS SHOULD PREPARE FOR A SALE AS M&A ACTIVITY RAMPS UP HEADING INTO 2017

  • Experts explain why digital businesses will catch the eye of investors in 2017
  • Digital Tech Industries grew 32% faster than the wider economy between 2010 and 2014
  • CVS experts provide an essential six-step guide to setting up a robust exit strategy

Company owners are being urged to capitalise on a predicted increase in merger and acquisition (M&A) activity in the digital industry in 2017.

Experts at business valuation specialists Company Valuation Services(CVS) believe that investors will continue to seek opportunities in this rapidly-growing sector, and it’s vital that entrepreneurs have exit strategies in place – even if they’re not thinking about selling up at the moment.

According to the Tech Nation 2016 report, published by Tech City in partnership with Nesta, UK Digital Tech Industries had an estimated turnover of £161 billion in 2014. Between 2010 and 2014, the digital economy grew 32% faster than the overall national average.

Liam Samuels, Managing Director at CVS, explained why the digital sector continues to thrive:

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“The government has certainly played its part in removing barriers to innovation and creating the kind of infrastructure that is needed to stimulate growth in the digital sector. Zephyr – the company deals database – shows that businesses within the computer, IT and internet services sector have accounted for almost 21% of all UK deals so far in 2016. We fully expect this trend to continue into the New Year.”

Whether or not you’ve entertained the idea of selling your business, Liam Samuels insisted that it’s still incredibly important to have an exit strategy in place.

“Things can change extremely quickly in such a fast-paced industry. Being prepared for a sale at any point in time allows business owners to pursue an exit at the shortest possible notice – meaning that a sale can be achieved when the market is most buoyant. It is important to have a sense of the wealth, assets and value of a business so that the sale process can realistically be started at a moment’s notice,” he added.

With this in mind, the experts at CVS have offered six essential tips for digital business owners to follow when devising a robust exit strategy.

  1. Identify successors from within

It is important that business owners surround themselves with a management team and shareholders who can readily take the business forward.

  1. Building a talented workforce makes your company so much more attractive

Securing a skilled workforce is imperative in assuring that a company stays at the forefront of developments in an ever-evolving industry. 43% of digital businesses said in the aforementioned Tech Nation report that access to talent is one of the biggest challenges to growth within the industry.

  1. Stay up to date on the latest infrastructural developments

This can also ensure that a digital business is allowed to grow in line with the market in general. Securing access to faster broadband and other digital infrastructure would enable a company to thrive and grow.

  1. Consider the type of exit you might want to pursue

Some business owners may wish to completely exit the company by disposing of all of their shares and stepping down from any roles that they hold. Others may feel that their business is in need of new investment in order to “take the next step”; these owners will likely want to part with just a portion of their shares and remain within the business in a current or similar role. A handover period will also need to be scheduled in if the investors are external.

  1. Set realistic price expectations

Ultimately, a business is only worth what an acquirer is willing to pay. It is important that, when placing a value on a business, all factors are considered – not just financial attributes.

  1. Think about timescales and possible deal structures

Does the current owner wish to exit at the earliest possible opportunity or are they willing to court multiple offers in order to realise maximum value and secure the best exit conditions for themselves?

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