The following aspects make your company an attractive acquisition target: 

1. Sector – niche or complimentary sector 
2. Perms and Contract - an even split and a balanced revenue line 
3. Management team in place - ideally for several years and who are going to remain with the new owners 
4. Strong and loyal customer base - who recognise the service offering and the dedication to the clients.  
5. Several PSL (preferred supplier list) agreements are in place - renewed annually 
6. Considerable investment in technology and supporting documentation - CRM/AI 
7. High profile clients - with a trading history 
8. High margin clients – strong margins  
9. Debtor days in control - strong financial controls in place  

• Strong balance sheet  
• Brand strength - recognised as a market leader in their sector – strong Glassdoor /Google reviews 
• Strong process and QA (quality assurance) control in place - the company has a strong attention to detail and operates a set of strong Standing Instructions 
• Previous years of strong profit, at least three 
• Market reputation in their sector, i.e., the benchmark 
• Strong reputation for growing and developing staff - reputation for developing employees and having a low churn 
• Strong supplier base – built over several years 
• Strong compliance structure - regular compliance audits 
• Key personnel – tied in with “golden handcuffs”  

In short, the process is straightforward:    

• You are approached by a broker/owner/VC  

• You engage with a solicitor to represent your interests  

• You decide to meet with the potential buyer, but you both sign an NDA before the meeting. 

• The first meeting concludes that there is interest from both parties  

• Further information is requested from the seller  

• The respective advisors meet to discuss the deal  

• Negotiations start, the advisors will be involved   

• The first offer is made  

• Terms are negotiated and agreed  

• Contracts are drafted with any restrictive covenants   

• The deal will be done if both parties can agree and sign the agreement   

Disclaimer All information is posted purely for your information. It is not intended as a substitute for special legal or professional advice. Should you decide to act upon any information on this website you do so at your own risk 

Do you really want to exit your business, are you sure? Make sure that you have decided and thought it through. Speak to your advisors your accountants your solicitor or people you trust. 

Your potential purchaser will require a lot of information, so they are able to evaluate the opportunity. 

Your buyer may ask you for the following information so have it ready to save time:

• Three years P and L statement Audited 
• Balance Sheet (3years also) Audited 
• Equipment leases/car leases 
• Outstanding Debentures  
• SLA agreements in place 
• Major Account arrangements 
• Accreditations 
• Historic and projected financial performance (Forecasts)

• Legal cases - any pending legal action against the business 
• Credit References  
• Legal and tax compliance 
• Any property leases or valuation of property 
• Invoice finance arrangements 
• Bank references 
• Are there any outstanding CCJ’s 
• Terms of Business - Standard Contracts 

Government guidance on closing a limited company

You usually need to have the agreement of your company’s directors and shareholders to close a limited company. 

The way you close the company depends on whether it can pay its bills or not. 

The company can pay its bills (‘solvent’) 

You can either: 

• apply to get the company struck off the Register of Companies 

• start a members’ voluntary liquidation 

• Striking off the company is usually the cheapest way to close it. 

The company can’t pay its bills (‘insolvent’) 

When your company is insolvent, the interests of the people your company owes money to (its creditors) legally come before those of the directors or shareholders. 

You must arrange the liquidation of your company. 

Your company might be forced into compulsory liquidation if you don’t pay creditors. 

You may be able to avoid liquidation by applying for a Company Voluntary Arrangement. 

If the company doesn’t have a director 

You must appoint a new director if your company doesn’t have one, for example if a sole director has died. 

Companies House will eventually strike off a company that doesn’t have a director but this can make it more difficult to manage any company assets. 

Shareholders must agree to appoint a new director and may need to vote on it. 

If a sole director has died and there aren’t any shareholders the executor of the estate can appoint a new director, as long as the company’s articles allow it. 

The new director can close the company. 

Your company still needs to pay corporation tax and file a tax return even if there’s no director. 

Let the company become dormant 

You don’t have to close your company if it’s no longer trading. You can let it become ‘dormant’ for tax as long as it’s not: 

• carrying on business activity 

• trading 

• receiving income 

• Your company will still be registered at Companies House. 

You must still send your annual accounts and confirmation statement (previously annual return) to Companies House. 

You can keep a limited company dormant for as long as you want. 

Find out more on the government website. 

This example process is not meant to be exhaustive but outlines the significant steps of the transaction when using a broker: 

Face to face meetings with the broker

• Meeting to discuss want you to want to achieve and for and seller to outline their exit strategy  

• Seller to provide information about their business, including financial accounts  

• Talk to the Seller regarding an indicative price for his business – what are they looking to achieve. 

• The broker will give a current review of the market and any recent sales in a similar sector  

• Agree terms and conditions with the broker

Marketing the opportunity

• The broker will produce a marketing campaign that will include a teaser and an Information Memorandum - to generate interest from those organisations that are looking to acquire 

• Contact their current clients and contacts in our network  

Market the opportunity to a larger audience via the website. 

• Review the overall market activity and prepare to follow -up with the marketing plan 

Buyer meeting

• As a result of the marketing plan, a shortlist of prospective buyers has been drawn up for further review. 

• Seller usually reviews the shortlist at this point, for fit and time to complete. 

• Based on the review of both the Seller and the broker, the broker would normally contact the potential buyers - if more than one buyer 

• Broker organises an initial meeting such the Senior Management Teams meet 

• All things being equal it is not unusual for the Buyer to ask for more detailed information such that they can value the organisation 

• It is crucial at this stage for the information to be accurate and available 

• Sourcing indicative offers and analysing their viability

• NDA drawn up for prospective buyers 

Following the information being given to the Buyer and the Buyer is satisfied with the content. The buyer can make an offer 

Offer Submission 

• Letter of intent (first or indicative offer) submitted  

• Additional meetings if necessary  

• Negotiation of offer structure including valuation, payment terms  

• Actively structuring and negotiating Heads of Terms 

Completion

• Due diligence - Applying their knowledge and experience  

• Contract writing/solicitors – Working closely with all parties to agree on the sale and purchase agreement (SPA) 

• TUPE transfer of employment contracts 

Teasers are used by Brokers, MA advisors, Investment Bankers. 

They are used to advertise that a business is for sale, or a company who is looking for an acquisition. 

No mention is made of the company name, but the instead a summary of the business capabilities and sector is given. 

They do however give a rough indication of where the business is based, together with a financial summary of the business to date and sometimes previous performance. 

The goal is to attract interest in the business.  

If there is interest in the business, they would contact the appropriate party. 

It is particularly important that you do not assume conversations with advisors are automatically confidential. 

 When potential buyers show interest in a business, they then would sign a Non-Disclosure Agreement (NDA) 

An NDA is a legal contract. The document sets out how you share information or ideas in confidence. Sometimes people call NDAs (Non-Disclosure Agreement) or confidentiality agreements. 

The Non-Disclosure Agreement is signed to protect the confidentiality of the company's Identity and to ensure that Information shared by the seller Is not used by the potential acquirer for Its personal or competitive gain. 

When the NDA Is signed, whoever Is acting for the seller will provide more Information in the form of the Information Memorandum. 

The upside to an MBO 

• The MBO team understands the business and what it needs to go forward and grow. 

• Low risk for the owners and the new organisation because of their knowledge and experience. 

• It is a solid investment for the MBO team. 

• Selling to the Management Team secures the future of the business and give certainty for their colleagues. 

The benefit for the MBO team is that they have intimate knowledge of the organisation and are aware of both strengths and weaknesses of the company. 

Potential downside 

• The business valuation may be lower than what could be achieved through a trade sale 

• Potentially, the MBO management team could lack the desired experience 

• MBO team could struggle to find the necessary funding to buy the business

One of the issues is the capacity within the management team in as much that the team is fully focused on the daily activity of running the business and may not have time to focus on the MBO itself.  

You can do it yourself, however it is better to enlist some support.

Typically, a professional services partner will be brought in to support the management team during and immediately after the MBO. MBO’s require specialist knowledge in structuring and financing to maximize the financial benefits and minimise potential risk factors.  

The management team may offer the owner a consultancy role as part of the deal. The new management team will be keen to demonstrate continuity to their client base.  

Whilst the owner inevitably leaves the business following his potential consultancy role, they may be engaged as a non-exec if the new management team see benefit in the role. 

You have built a solid business and while you would like to retire or do something new, you would like to continue with your recruitment business.  

One of you family members has shown an interest in the business and has a commercial background. 

You both have decided to give the arrangement a trial. This will allow the new family member to see how the business works and functions and decide if the recruitment sector is for them.  

It will also allow you to set targets and business milestones to protect your investment.  

Recruitment is not for everyone and it maybe that the family member does not have what it takes to replace you, or they are a natural. 

If they are a natural, you can take a back seat and set the targets for a potential shareholding for the newest member of the team. 

The transition is key to the success of the venture: you need to give them enough time to and space to grow into the role, but always be available to offer advice when needed. 

An acquihire, also known as a talent acquisition, is the purchase of one company by another for the sole purpose of keeping the business's employees (usually in the tech sector).  

Where there is a skill shortage! 

This type of acquisition can be beneficial to skilled employees, as you can be confident, they will be well looked after once the business itself is sold. The employees are offered benefits to stay, typically bonuses, and potentially share options based on performance.

Firstly, you should define your objectives for a deal.  Consider what you want from a transaction, thinking beyond simply maximising value.  Do you want to exit in full, or maintain an ongoing shareholding in the business? In what timeframe are you looking to exit? Are there key members of staff that you’d like to be looked after and are they properly incentivised? Clearly defining your objectives will help you, your senior team and your advisers guide the process more effectively.  

There are two main routes for selling all or part of your business – a trade sale to a strategic acquirer, or a sale to a financial acquirer or private equity (“PE”) house, with a number of key differences between the two. 

If you’re thinking about making a complete exit, then a trade sale is probably the best route for you because PE houses will likely only take a (majority or minority) stake. So, if you’ve decided the time has come to retire and enjoy all that quality time you’ve been promising yourself for so long, a trade deal would be the best way to make that happen. It would also be the route to go down if you wanted to sell the entire business and then set up a completely new venture with the proceeds. 

The PE avenue really comes into play if you only intend to sell a proportion of the business. A common scenario is where the owner knows there is potential for the company to really grow and expand – but needs a capital injection to help make it happen or accelerate the process. Not only will you personally receive a payout for the stake you sell (although the PE investor will almost certainly require you to channel some of this back into the business), the PE house is likely to put more money into the business to achieve the growth plan. Their aim is usually to expand the business over a 3-5 year timeframe under their ownership and sell at a higher value, achieving a strong return for themselves and you. 

Another common attraction of a PE deal is that it enables you to take some money out of the business and de-risk your financial situation personally. Private enterprise owners often have significant personal wealth tied up in the business, and a PE deal helps begin the process of extracting it. 

With PE deals, it’s important to think about how big a stake you’re happy to sell. A sale of a minority stake means you’ll get less money on day one – but will remain in control, with the support and input of the investor. A sale of a majority stake means you’ll get more money on day one – but will be ‘answerable’ to the PE house. You’ll still be running the business, but ultimately they are now the owners. 

What often happens in our experience is that sellers are happy to take a dual-track approach – gauging interest from both trade and PE, and then weighing up what is the most attractive option for them.

It cannot be stressed enough how important it is to properly prepare your business for sale.  A staggering number of transactions end up achieving a sub-optimal result, or even fail to complete altogether, because of a lack of planning.  Issues which could have been identified and mitigated ahead of a transaction can crop up during a process, preventing a transaction from proceeding, or inviting a reduction in price. 

Spending time up front conducting a thorough review of all areas of your business from financial, to legal, to HR, to data protection, to IT, will pay dividends down the line.  Consider your business from the perspective of a potential acquirer – what information would you want to see in a due diligence exercise and where would you assume the key risks to be? 

If you’re looking primarily at a trade sale, then bear in mind that what will be top of mind for a buyer will be where the synergies lie between your businesses – what opportunities for cost efficiencies and economies of scale are there whilst also increasing their market share/customer base? PE buyers, meanwhile, are more likely to be focused on the growth plan of the business – what potential is there to increase market share, revenue, and profitability? They’ll also be very focused on your management team and assessing their strengths and quality. 

It’s important to get a good corporate finance advisor on board as early as possible.  They can talk you through the various options and take on much of the work that’s required to prepare and collate the information you’ll need to provide prospective buyers. 

Your advisors will prepare a compelling prospectus (Information Memorandum) and begin reaching out to contacts at potential buyers and their networks to start creating interest. They can also help you devise creative ways of showcasing your company. For example, through Covid-19 when physical site visits often weren’t possible, we have helped a number of sellers put together drone footage and virtual tours of their business. This can really bring your company to life! 

Thereafter interest from buyers will be shepherded through a process, where maximising momentum and competitive tension whilst simultaneously minimising time in market is key, through to completion. 

If you are thinking about selling, early engagement with an advisor can really pay dividends. There’s so much to think about and being clear from the outset can make the process much smoother. Selling your business can be an emotional rollercoaster – but a good advisor can take the strain and be with you all the way, from first conversations right through to the big day of deal completion itself. 

This process is complex with many challenges along the way. When undertaking an M&A strategy, be aware of the potential risks and plan for their mitigation. An example of where the strategy could go wrong are:  

• Cultural clash  
• Brand dilution or weakening of reputation   
• Confusing value proposition  
• Loss of control 
• Legal issues  
• Technological incompatibility 

Despite the difficulties that M&A could bring, they are still some of the best ways to scale your business quickly. Watch our video by Tina McKenzie, CEO of Staffline, around her company’s experience of acquiring a business, and the lessons learned by senior leaders.  

After the initial shockwave of the third national lockdown, the UK business world, filled with confidence, drove a strong recovery in Q2. However, that initial positivity has started giving way to a more cautious outlook over concerns of growing inflation and rise in energy prices. Case numbers are on the rise and are likely to continue as schools go back and larger events return. Overall, the UK’s labour market has showed strength and resilience this year but concerns around labour shortages threatens to slow the recovery further.  

In hindsight, 2020 was a trickier year for many but especially for recruitment businesses and especially to the ones looking for a business exit. The UK recruitment industry showed resilience in these unprecedented times and weathered the hit in merger and acquisition (M&A) activity reasonably well with only a 19% drop in comparison to 2019. In total, there were 21 M&A deals completed within 2020 with almost half (48%) of them taking part in Q4.  

Looking at the first six months of 2021, there are factors that could have affected M&A both positively and negatively. The continued uncertainty around the pandemic, future implications after Brexit but also the economic recovery and the boom in GDP in Q2 (although that seems to be cooling off now).  In terms of breakdown, 52% of recruitment M&A activity was private equity deals, with 39% trade and 9% MBOs. There was also a relatively even split for the M&A activity taking place in Q1 (48%) and Q2 (52%). Due to the limited impact from the pandemic and our increasing reliance and investment in technology, RecTech was a standout in first half of 2021, taking up 42% in deal activity.   

With the projections of economic slowdown in the later part of the year, we could also expect M&A activity to slow down in comparison to the boom in Q2. We could also expect activity to pick up in sectors that took longer to recover due to coronavirus restrictions.  

Additional data:  

According to the latest ONS’s mergers and acquisition (M&A) yearly overview the number of M&A in 2020 has been affected by the coronavirus (COVID-19) pandemic.  

In Q2 2021, mergers and acquisitions (M&A) activity continued to be affected by the effects of the global coronavirus (COVID-19) pandemic. The total number of completed monthly domestic and cross-border M&A rapidly fell to a low of 58 in May 2020.  

A BDO research, indicate that investors were drawn to well-run recruitment businesses with excellent management teams, focussing on markets that are experiencing growth in the current economic conditions.  

There are two scenarios in which TUPE regulations will apply. 

The first is if a section—or all—of your business moves to a new owner. This also includes a merger between two organisations. 

The second is if a service provision transfer occurs. This means you’re outsourcing an internal service, or an outsourced service is becoming internal.