Selling My Business is a knowledgeable, experienced and professional business sales brokerage with specific expertise in the construction industry.
When the time comes to sell your construction business, it is vital to ensure that you achieve a smooth and efficient sale at the right time, to the right buyer and most importantly for the right price.
With over 30 years’ experience and more than £500 million raised in business sales Selling My Business has the specialist expertise required to handle your business sale professionally, profitably and effectively. We understand that construction business sales carry their own complications and other specific requirements, and so our team of construction industry specialists will handle your sale with the expertise required to ensure a successful outcome.
Successful business sales are often surprisingly complex affairs, especially within the construction industry. There are numerous pitfalls that may befall potential construction company sales, which may be difficult to predict even when you work within the sector. Our construction business sales experts can ensure that:
There are many reasons why you may want to sell your construction business; profits could be soaring and you feel that it’s time to cash in, you can sense a change coming and feel that now is the prudent time to get out, it’s finally time to start that well deserved retirement or you simply want to free up some cash so that you can explore that next big opportunity.
The UK construction industry as a whole has faced a turbulent few years and this is a trend that seems set to continue. According to recent data from the Office for National Statistics, September 2017 saw new orders fall at their fastest quarterly rate for 3 years, and the latest Markit / CIPS purchasing managers’ index recorded activity of 48.1 in September 2017, down from 51.1 in August and 51.9 in July, sparking fears of a recession in the industry.
However some construction sectors are seeing a rise in fortunes. For example the demand for new UK housing is currently outstripping supply. Current estimates put the need for additional housing in England at between 230,000 and 300,000 more units per year, which is approximately 2 to 3 times above the current supply levels.
There is also a large proportion of the construction industry which is made up of reasonably small companies who have a steady and reliable turnover, but a relatively small growth profile. Through reliable business investments or via mergers and acquisitions strategies many of these small companies have the potential to be reinvigorated or consolidated into larger and more profitable affairs.
Therefore even though you may see the market as turbulent, now could actually be the right time to sell. Our experts closely monitor the construction industry and after thoroughly assessing your business will provide open and honest advice about whether it is the right time to sell your business and what price you should realistically expect.
Obviously the best time to sell your construction business is whenever you will get the best price - however knowing exactly when this is can be extremely difficult. By utilising our expert insider knowledge and closely monitoring market trends we have the capability to recognise when it is the right time to sell your business. Different sectors of the construction industry can actually follow widely varying fluctuations, even sometimes bucking seasonal trends, so we will forensically analyse your business and fully assess its sales potential.
Also, one of the most important things that you can do is to be ready to sell your business when that right time arrives. It may sound counterintuitive but some of the best business sales come from those who have been planning their exit strategy for at least 2 or 3 years pre-sale.
Valuing a construction business can be a complex and potentially divisive process. Setting a realistic market valuation which also pleases the owner and any shareholders requires forensic accountancy expertise. Generally your construction business will be valued by using an agreed multiplier alongside EBITDA (Earnings Before Interest, Tax, Depreciation and Amortisation) which measures your company’s operating performance without having to factor in financing decisions, accounting choices or tax environments. Professionally undertaking this process results in a fair business valuation being set which will stand up to the due diligence process.
However construction company valuations can also be effected by a number of other factors that can be less easy to quantify.
For many businesses in the construction sector, a large amount of their value may be tied up in the goodwill that is inherent in either the company name or with the owner themselves. Contracts may be built upon personal relationships, which could suffer once the departing owner leaves. However placing a price on what is essentially an unquantifiable asset can be very difficult. Our team of experienced construction business valuation experts have the knowledge and skills to place a fair and realistic amount on the value of your business’ goodwill.
Also if a construction business is to be sold as a going concern then a separate value may also need to be placed on plant equipment and machinery, which can then either be included in the overall price or calculated as an extra. However valuing assets is also not always straightforward. Simply estimating an amount based on original purchase price with a standard depreciation deduction often results in figures that are significantly higher than if the item were to be immediately sold on the open market, but could still be a fair valuation if the item were to continue to be a vital business asset.
There are a number of things that all business owners should do when looking to make their company as attractive to potential buyers as possible; keep your books up to date, build up a strong credit score and clear any debts. However many construction companies will also need to address a number of other more sector specific issues.
An issue that runs throughout many construction companies is the lack of clear accounting and financial records. Having large amounts of your turnover made up from unrecorded cash in hand jobs or failing to properly record supply chain arrangements can result in your business looking in a worse financial state than it actually is. Therefore ensuring that your business accounts are strong and will stand up to scrutiny is vital. A robust, profitable and fully legal accounting structure will make your business much more attractive to potential buyers.
We have already mentioned the inherent value of the goodwill that an owner has created in their business. However more than just placing a figure on this, any reasonable amount of goodwill that is tied up with the owner may cause potential buyers to be reticent about the future of the business once the owner has left. Smart owners can mitigate this by handing over control of the business to an incentivised manager gradually over several years preceding the sale. Or also consider selling the business with an optional earn-out scheme for the owner to help to smooth the transition period.
Goodwill can also be a positive feature for a business, especially if time and effort has been spent building up a relationship with reliable subcontractors which can then be continued under the new ownership.
Selling a construction business with a number of ongoing projects, maintenance contracts and other forms of work in progress can help to make it more attractive to potential buyers as they will be able to realise immediate profitability. However there are issues to be addressed surrounding the transfer of these into the new owner’s jurisdiction, even if the company name remains the same. There is also the issue of work in progress debit accounts potentially negatively affecting the overall business value, even though they should be profitable in the long run.
Also the company being included in framework agreements, or on preferred supplier or tender lists can add significant value to the business and make it much more appealing to potential buyers to run as a going concern.
Our specialist team has the expertise required to process the transfer of warranties and ownership clauses in contracts that are required for any claims made against previous work, but to the new owner. This can often be a complex legal process and so must be handled proficiently.
Construction business sales may also need to consider CIS registration. For example if a business previously run by an individual is taken over by a partnership or company, the old scheme registration cannot be used for the new business. Also if a company is taken over as a going concern authorisation must be requested from HMRC to continue the treatment of certain subcontractor verifications as made by the previous business – this will normally apply to any subcontractors who are working on ongoing contracts which have spanned the two business ownerships.
For more information or advice about selling your construction company contact Selling My Business today.
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