Why owners trust EvolutionCBS to sell their businesses
Senior Client Director Steve Barry’s recent journey to Europe to discuss a potential acquisition of a UK client typifies the approach of business sale consultants EvolutionCBS to getting deals over the line.
The Berkshire-based consultancy has experienced a strong run of dealmaking since the start of the year.
“We spend a lot of time finding the right match for our clients,” Steve (pictured) suggests. “Our aim is to get as close as possible to perfect. A cultural misfit has been the death knell of many mergers and acquisitions.”
In this respect, EvolutionCBS believes the M&A industry is “quite wasteful”. Steve goes on to explain: “Feedback from clients who’ve previously worked unsuccessfully with our competitors tells us many smaller and mid-market companies will often receive only light touch input from their advisers and subsequently there’s a lower likelihood of success.
"Typically, the industry average is that only one in five deals that go to market are completed.”
With its commitment to working closely with both seller and acquirer, EvolutionCBS challenges the light touch approach, succeeding with four out of five of its business sales, a significant achievement given the economic volatility of recent years.
Quality over quantity
EvolutionCBS is a relatively small boutique firm that derives most of its business via referrals from professional services firms and satisfied clients.
EvolutionCBS principally acts as a conduit between acquirers (often financial investors, private equity firms and large organisations) and business owners, who rely on its expertise throughout negotiations. It is very much a ‘low volume, high touch’ strategy. Steve explained:
“We’re very hands-on, proactively getting under the skin of a client’s business to fully understand where they currently are and what they want to become. Financial investors recognise that our approach is different.”
The firm is currently busy extending its network with professional advisers across its Thames Valley base and plans to expand its core team of client directors and researchers with additional key appointments in the pipeline. All without losing the personal touch on which its reputation has been built.
Recent deals include the sale of design and engineering company Specific Environments to US buyer Angstrom Technology when the owner wanted to retire.
The firm also advised the founders of Egress Ltd, when they wanted to take their cloud and data migration business to the next level through a multi-million-pound sale to FPE Capital, a software and services focused lower mid-market growth investor.
Structuring for successful deals
Success relies on getting both sides excited. “You’re much more likely to get a deal over the line if both sides are totally committed to making it happen,” posits Steve.
As you’d expect, finding an acceptable middle ground often requires a degree of compromise. “We often hear ourselves saying both to clients and investors that they need to put themselves in the other person’s chair and see the deal from the other parties’ perspective,” said Steve.
Clients trust EvolutionCBS to pre-qualify a shortlist of potential investors. “We do all the heavy lifting for clients and facilitate all the moving parts in the transaction,” says Steve.
Occasionally, the preferred bidder is not the organisation tabling the highest offer. “About half of the deals we complete don’t go to the highest bidder, but to the best fit – for the owner, their management team and their employees,” noted Steve.
Deal trends
The M&A industry is seeing a lot of post-pandemic pent-up demand, with investors looking for the right home for their money. Reflecting on the market, Steve suggests this could be the right time to consider selling or finding new investors:
“Companies that have survived Brexit and COVID-19 have proved their resilience and so ultimately have a stronger business to sell.”
Rather than selling up, EvolutionCBS notes that more owners are looking to scale up by selling a stake to new investors.
“This has the benefit to investors of de-risking their investment because the experienced owners will be there for the next stage of the company’s journey,” explains Steve.
He continued: “The average age of business owners in transactions seems to be coming down. We are seeing fewer pure retirement sales and more owners with ‘gas in the tank’ who want to go again, they just aren’t sure yet what direction to go in – so that’s where we can help.”
What do investors look for in a business?
Top tips from EvolutionCBS to help business owners understand how a deal looks from the other side of the table include:
• Build up strong management with operational responsibility. If a business relies totally on its owner and they retire then it will have to succeed without them, meaning investors must accept a bigger risk
• Acquirers can get nervous if a company depends on a single or small group of customers – avoid customer concentration
• Acquirers love intellectual property as it has intrinsic value. Also, contracted recurring revenue and long-term projects are equally important as they deliver stable earnings.
More information
Get a free business valuation here. To find out more about EvolutionCBS email: [email protected]
