Dr Jürg Stucker: A business should be managed in such a way that it can be sold at any time

A business should be managed in such a way that it can be sold at any time, said Dr Jürg Stucker, Global Executive Committee Member at Oaklins International and Partner at Oaklins Switzerland, during an event in Nicosia.

In his presentation, entitled “Selling a business with excellence”, Dr Stucker said that early and effective exit planning leads to higher valuations and more deal security. “A business should be managed in such a way that it can be sold at any time,” he said. “If a company is not yet prepared for sale, three years is an optimal preparation period.”

He was addressing an event dedicated to the M&A market that was organised by Oaklins on 27 September at Pralina Experience in Nicosia, and was attended by experts in the field who exchanged views with other business professionals in Cyprus.

The best time to sell, said Dr Stucker, is when the company is profitable and there are good growth prospects.

“Consider the market conditions and the company's performance before deciding on the optimal timing for the sale,” the Oaklins professional suggested. “A strong financial performance and a favourable market can increase the chances of a successful exit.”

He also recommends setting up an experienced team who can guide the business through the process and help find suitable buyers.

“Preparing for an exit M&A transaction, whether from the owner's perspective or at the company level, requires careful planning and execution,” he stressed. “Clarify your personal and financial objectives for the exit. Determine what you seek to achieve from the sale, such as maximising profit, finding the right buyer, or ensuring the company's legacy.”

He urges businesses thinking of selling up to conduct a thorough review of their personal financial situation and consult with experts to understand the tax implications and legal considerations of the sale.

“It may help to obtain a professional valuation of your business to understand its market worth. This will help you set realistic expectations for the sale and negotiate effectively with potential buyers,” he said.

When it comes to preparing at the company level, Dr Stucker says the company must ensure its financials are in order and transparent.

More tips include:

• Optimise operational efficiency and profitability to present a compelling investment opportunity to potential buyers.
• Clean up the company structure and address any legal or compliance issues, resolve pending lawsuits, and ensure that all regulatory requirements are met.
• Organise and update all business documents, contracts, licences, intellectual property rights, and other key assets. This will facilitate the due diligence process for potential buyers.
• Ensure a competent and stable management team is in place. Buyers mostly value companies with strong leadership and a skilled workforce higher.
• Strengthen key customer and supplier relationships to showcase the company's stability and potential for growth.
• Secure any intellectual property rights, patents, trademarks, or copyrights that add value to the company.
• Implement confidentiality measures to safeguard sensitive business information during the sale process.

How do you prepare at the transactional level? Dr Stucker said a key element is the engagement of the best possible team of trusted advisors.

“It is also important that all participants have no conflict of interest and are equally incentivised, not that some individuals pursue their own agenda,” he said. “In recent years, we have often had the situation in sales mandates that we first talked to one or two interested parties and only afterwards initialised a broad auction. This opens up the option that a transaction can be concluded very quickly with an existing interested party and if this fails, we have already learned quite a lot in this initial discussions for the subsequent broader process. Especially for the management and the owner, this preliminary phase can be very helpful.”

They then understand the buyer's perspective much better and have already answered many questions that will come up later again, he pointed out.

When should you start preparing for a sale? “As a general rule of thumb, preparation should start as early as 3 years prior to sale,” said Dr Stucker. “Can it be done in 6 months, sure, and it is often the case that 6 month or less is available for preparation. But let's take a brief look at how long individual preparatory measures take: Hire a new sales person 2-6 months; Recruit a new management team 6-12 months; Launch a new product line 12-24 months; Implement a new ERP system, open a new facility or make ad on acquisitions 2-3 years; Overall 3 years seems to be the ideal time frame to make meaningful adjustments to the way the business is operated.”