Following part one of our article which explored the recent trends in Foreign Direct Investment (FDI) in the UK, the second part of our article explores the key questions that you, as a UK business owner, may be asking if you want to look at selling your business to an overseas acquirer, or in the event that you receive an approach from an overseas buyer.
What is it like to work with overseas buyers?
Where acquisitions are strategic and not hostile, there is still reason to be cautiously optimistic if you are looking to sell your business to an overseas buyer in the current economy. In fact, sales of UK businesses to overseas buyers may provide a much-needed boost to the UK economy. Nevertheless, every potential opportunity to sell (whether to an overseas and domestic buyer) should be assessed on its individual merit.
As corporate finance advisors, we advise businesses looking to acquire on or off-market opportunities and businesses looking to sell involving both overseas and domestic investors. Based on our experience, we are always keen to point out the differences between the two different types of investors to our clients. Here are some key points to keep in mind:
- Time Zones: Operating in different time zones can pose challenges during the deal process. For cross-continent deals, it’s important to anticipate potential delays in decision-making, problem-solving, and collaboration due to time zone differences. To mitigate these issues, establish clear communication channels, set realistic timelines, and proactively manage expectations among all parties involved.
- Cultural and Language Issues: Cultural nuances and language differences can impact negotiations with international investors. Misinterpretations and misunderstandings may arise, leading to misaligned expectations. Familiarise yourself with the cultural practices and communication styles of the target country or region. Be patient and open-minded, and consider engaging a translator or interpreter when necessary to ensure clear and accurate communication.
- Extensive Due Diligence: American investors are often known for their rigorous due diligence processes, which can be more thorough and time-consuming compared to European counterparts. Prepare for extensive questioning and scrutiny of all aspects of your business. As business owners, it is essential to proactively manage the flow of information, prioritising what is necessary while ensuring confidentiality. Work closely with your advisors to streamline the due diligence process and maintain control over the information shared.
- Legal Variations: Different countries have distinct legal frameworks, and it is crucial to have a comprehensive understanding of the relevant laws throughout the transaction. Be aware of variations in contract law, such as the enforceability of letters of intent, which may differ from one jurisdiction to another. Engage legal professionals experienced in international transactions to guide you through the legal aspects and ensure compliance with local regulations.
- Punchy Valuation Multiples: Selling your business to an international buyer can often result in more favourable valuation multiples compared to domestic investors. According to recent data published by Dealsuite (a deal origination platform looking at the UK mid-market, being companies with revenue of between £1m and £200m) in February 2023, average EBITDA multiples in the UK & Ireland were 5.1x, compared to 5.65x in Central Europe (Germany, Austria and Switzerland) and 5.25x in France. The contrasts are often more pronounced outside of Europe, with America often offering more ‘punchy’ multiples.
International buyers may recognise the value and potential of your business, leading to higher offers. Leverage this advantage by showcasing the unique strengths and growth prospects of your company. Work with valuation experts and advisors who understand the dynamics of international transactions to negotiate the best possible terms.
Fundamentally, we are seeing a significant proportion of larger international transactions with over 75% of recent deals involving an overseas counterpart, and realistically we expect this to continue going forward.
If this is a path that you want to take your business down, there are plenty of opportunities available to you.
As a business owner considering a sale to an overseas acquirer, understanding and addressing these key considerations will help you navigate the complexities and maximise the potential benefits of an international transaction. Seek the guidance of experienced advisors who specialise in cross-border deals to ensure a smooth and successful process.
How can I attract an overseas buyer?
Many UK business owners are alert to the fact that the UK presents an attractive investment opportunity to overseas acquisitive corporates and investors. However, we are often asked the question of how a business can successfully attract or target overseas acquirers.
Attracting an overseas acquirer for your UK business requires a strategic approach to increase visibility and appeal to potential international buyers. While there is no guaranteed formula, the following strategies can enhance your chances of attracting an overseas acquirer:
- Build International networks: Establish connections with professionals and organisations in your industry across different countries.
- Attend trade fairs, conferences, and industry events abroad to expand your network and make valuable contacts.
- Actively participate in relevant online communities and forums to engage with international professionals.
- Cultivate relationships with influential individuals who have international connections and can introduce you to potential overseas acquirers.
Whilst it might seem ‘old school’ to meet potential acquirers at industry exhibitions and trade fairs, especially international acquirers, this is a genuine route to get noticed. In December 2021, we advised on the sale of Roots Solutions to a Swedish buyer, PDSVISION.
Roots Solutions were initially approached by PDSVISION over six years prior to the acquisition following an industry event. Whilst the timing wasn’t right, the connection was made and when Root Solutions were ready they got back in touch regarding the sale, resulting in a successful deal for both parties.
- Enhance your online presence: Invest in your company’s online profile to make a strong impression on potential acquirers. This can include ensuring your website is up to date, investing time in search engine optimisation and creating valuable industry-related content via your website, professional networking and social media platforms to showcase your expertise and industry leadership.
- Seek strategic partnerships: Explore collaborations and strategic partnerships with international companies in your industry. These partnerships can lead to opportunities for joint ventures, licensing agreements, or eventual acquisition. Demonstrate your willingness to collaborate and explore mutually beneficial relationships that can enhance the growth prospects of both parties.
- Leverage professional advisors: Engage experienced advisors who specialise in cross-border transactions and have a network of international contacts. These advisors can help identify potential overseas acquirers and navigate the complexities of international deals. They can also provide valuable insights into cultural nuances, negotiation strategies, and legal considerations specific to different jurisdictions.
- Understand the target market: Conduct thorough research on the target market you wish to attract.
- Gain insights into the needs, preferences, and investment patterns of international acquirers in your industry.
- Understand the market dynamics, regulatory landscape, and competitive landscape in the target countries to position your business as an attractive investment opportunity.
Remember, attracting an overseas acquirer requires a proactive and targeted approach. By implementing these strategies and leveraging the expertise of professionals, you can increase your visibility and appeal to potential international buyers.
Phil Sharpe, Price Bailey Partner:
Hiring the right advisor is key to getting a deal done whilst maintaining the business’s success and the seller’s sanity. I’ve acted for clients who have previously tried to sell their business unadvised. The process can become protracted, consume your attention and energy and by the end (if it gets there) is more of a relief than a celebration.
Duncan Easley, CFO of Specialized Security Products Limited:
I would not hesitate in recommending Price Bailey, and in particular Phil Sharpe, Chris Mitchell and the team to anyone selling their business. The sale of a business is a stressful time and they were with us every step of the way, providing advice and support as and when required. Even when assistance was required outside of normal hours they were always on hand to make sure everything ran smoothly. Right from the start they understood our requirements and objectives, and worked tirelessly to deliver them. Their experience and knowledge of everything around the sale was first class and undoubtedly ensured that we got the best possible outcome.
If you have been approached by an overseas buyer and are unsure on what to do next, please get in touch with one of our team using the form below.
We always recommend that you seek advice from a suitably qualified adviser before taking any action. The information in this article only serves as a guide and no responsibility for loss occasioned by any person acting or refraining from action as a result of this material can be accepted by the authors or the firm.