Why can't selling a business
be more like selling a house?
April 2007

How to sell a business, even though it may take months, not minutes

WITH CENTRAL LONDON property getting snapped up within minutes of being listed, now is a great time to be selling a house (or to be an estate agent). The market is so hot that buyers are gazumping even themselves - putting in top-up offers to supplement their own entries in sealed bid auctions!

In these heady times, it may barely be worth bothering with a lick of paint, fresh flowers and the aroma of coffee to add to the appeal of a house for sale. Demand in the capital has outstripped supply so much that mere availability counts for more than attractiveness.

But the facts of life still apply to selling anything, whether it's a property or a business:

Valuation reflects the (im)balance of supply and demand.

Since a seller is limited in what (s)he can do to affect this balance, it often seems that "timing is everything". This is not actually true, because:

Demand can be increased by increasing the attractiveness of the asset,

either absolutely, or relative to others like it, or both; and

Demand can be increased through competition

(because competing buyers encourage each other to see value at the upper end of the relevant valuation range).

While there are similarities between selling a business and selling a house, there is much greater to scope to add value to the sale of a business:

You can't tow a house into an area of high demand, but you can move a business, over time, into the sights of a strong strategic buyer;

Whereas houses and businesses have stand-alone attractiveness which deserves "grooming", only businesses offer "synergy benefits" to strategic buyers. Sometimes the value of a combination is greater than the stand-alone value of a business (although extracting synergy value from a buyer won't happen without competition).

Competition is easy to orchestrate for a house (through listings and adverts), it is often difficult to orchestrate for a business, since:

Confidentiality is usually vital, so buyers have to be approached and engaged;
Corporate buyers are busy, often pursuing other opportunities;
Assessing a business is so much more complex and expensive than assessing a house;
The complexity of the contract creates a demand for exclusivity.

So no wonder it takes several months to sell a business for all it's worth. And no wonder that selling a business can't be more like selling a house. There are much bigger risks involved - after all, a house never collapses if a sale fails. And there's much more work involved, with much more potential to add value - after all, estate agents can't triple the price you get for your house.

Essential book on Value-Building now available to buy here

'Increase and Extract the Value of Your Business', co-written by Shield M&A's David Young, is an essential book for business owners and leaders, showing how to build value and make a business more saleable, what a sale involves and even how to realise value without losing control.

If you are interested in any of the following questions then this book is for you:

Can I realise value without selling/losing control?
How can I make my business more saleable?
How can I maximise value in my business?
What choices and alternatives are there?
What would a sale involve?
What is value?

Get your copy here

About Shield Corporate Finance

Shield's Chief Executive and Founder, David Young

In 2001, David Young founded Shield Corporate Finance as an independent specialist advisory firm, to provide world-class M&A advice without regard to transaction size and without conflicts of interest. With a special interest in the keys to success in divestiture work, Shield M&A is committed to producing remarkable results for shareholders.