Half of business exits come from unexpected approaches, says Azets

Half of business exits in the last three years have stemmed from an unexpected approach from a buyer, according to research from Azets.

As a result, the firm believes that many business owners have failed to maximise value as they were unprepared for an offer.

The unsolicited approach has become increasingly common since the pandemic and reflects the strong cash reserves built up by corporate buyers.

Private equity investors have raised billions in funding and are highly focussed on deploying it for acquisitions as part of their ‘buy and build’ strategies.

This warning comes as Azets predicts an increase in mergers and acquisitions in the next six months to a year.

Lee Humble, UK head of Corporate Finance at Azets, said: “The SME sector is rife with innovative, ambitious and entrepreneurial companies, so successful businesses can easily land on the radar of acquisitive corporates, whether they are based here in the UK, in continental Europe, or further afield, without knowing.

“Cold approaches are often extremely flattering and it’s very easy to end up deep into a process very quickly. This is both an opportunity and a risk – an opportunity to realise great value for the shareholders, but only if their business is prepared and presentable, but a risk if an approach catches the business owners and management unaware, and results in value well below the business’ full potential.

He added: “Unfortunately, nine times out of ten a company is simply not prepared for sale, is immediately on the backfoot and hence find it difficult to gain the upper hand in negotiations.”

“Our research indicates that the majority of successful businesses leave exit planning to the last moment. We encourage business owners to add ‘exit value’ to board agendas to focus minds on getting exit ready, even if a planned sale is not imminent.”