Mergers And Acquisitions » When is the right time for a CFO to advise selling the business?

When is the right time for a CFO to advise selling the business?

The Hawksmoor restaurant chain, known for its high-quality steaks and operating 13 locations (10 in the UK), is up for sale in a deal potentially valued at around £100 million.

Graphite Capital, owning 51% of Hawksmoor since 2013, is seeking to expand the chain internationally, having recently opened a location in Chicago and planning further US expansion. Hawksmoor’s co-founders Will Beckett and Huw Gott will retain their minority stakes and continue leading the company. The sale process is managed by investment bank Stephens.

This move aligns with broader trends in the UK hospitality industry, which has seen several significant deals despite economic challenges.

The decision to sell a business can be a pivotal moment for any entrepreneur, marking the culmination of years of hard work, strategic vision, and unwavering commitment. As the financial steward of the organisation, the CFO plays a crucial role in ensuring that the timing and execution of the sale maximise value for all stakeholders.

The Factors Driving a Business Sale

There are typically three key drivers behind the decision to sell a business, as outlined in the reference articles. The first is the owner’s own assessment of the company’s current state and future potential. If the current leadership feels that they have taken the business as far as they can, or that the organisation has outgrown their ambitions, a sale may be the logical next step.

The second factor is the appetite of potential buyers. Unsolicited approaches from interested parties or favourable market conditions, such as a bustling mergers and acquisitions (M&A) landscape, can spur owners to explore a sale. Finally, the external environment, including industry trends and competitive dynamics, can also influence the decision to divest.

” When we opened our scruffy little restaurant in 2006, we told ourselves that there would never be a second. But, as with everything we’ve done, things didn’t quite go to plan. Years on, and we’ve taken the plunge and opened in New York and are expanding into new cities across the UK.” – Beckett and Gott.

Preparing for a Sale

The CFO plays a pivotal role in preparing the business for a successful sale. This process begins well before any formal discussions with potential buyers.

The first critical step is assembling a strategic deal team, which typically includes key members of the C-suite and external advisors such as investment bankers, business brokers, and M&A legal counsel. The CFO must carefully curate this team, ensuring that its members possess the necessary expertise, reputation, and network to navigate the complex sale process effectively.

Time is of the essence when it comes to M&A transactions, and the CFO must ensure that all relevant financial and operational documents are readily available and meticulously organised. This “dealroom” approach allows the company to quickly respond to information requests from potential buyers, maintaining the momentum that is so crucial to closing a deal.

The financial performance of the business is also a critical factor in determining its valuation and appeal to buyers. The CFO must work diligently to strengthen the company’s profitability, cash flow, and overall financial health in the years leading up to the sale. This may involve implementing cost-cutting measures, improving working capital management, and exploring new revenue streams. The CFO must also work closely with tax advisors and wealth managers to ensure that the sale is structured in a tax-efficient manner and that the owners’ personal financial plans are appropriately aligned with the anticipated proceeds.

Ensuring that existing owners, management, and key employees are aligned on the goals and strategy for the sale is another crucial responsibility of the CFO. Any discord or misalignment can significantly undermine the transaction’s success.

During the Sale Process

Once the decision to sell has been made and the preparatory work is underway, the CFO’s role shifts to actively managing the transaction.

It is essential that the CFO ensures the business continues to operate at a high level during the sale process, as potential buyers will be closely scrutinising the company’s performance. This delicate balancing act requires the CFO to allocate resources judiciously, minimising disruption to day-to-day operations while also dedicating the necessary time and attention to the sale.

The CFO plays a central role in the due diligence process, providing potential buyers with comprehensive financial information and answering their myriad questions. This requires the CFO to be well-versed in the company’s financials, operations, and key value drivers, as well as adept at anticipating and addressing any concerns that may arise.

Drawing on their financial expertise and understanding of the business, the CFO should work closely with the deal team to negotiate the most favourable terms for the sale. This includes aspects such as the purchase price, payment structure, and any contingencies or post-closing obligations.

Finally, the CFO must ensure a seamless transition of the business to the new owners. This may involve assisting with the integration of financial systems, providing training to the acquirer’s finance team, and addressing any post-closing financial matters.

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