The key facts around exiting a business

The global statistics around selling a business demonstrate how challenging and rewarding the process can be if executed strategically. Here are the major insights to keep in mind when it comes to selling a company:

1. Likelihood of Selling a Business

• About 20% to 30% of listed businesses on the market successfully sell, while the remaining often fail to secure buyers due to mismanaged processes, poor preparation, or unrealistic valuations.
• The success rate increases dramatically for businesses that are well-prepared, have documented processes, and are clear on valuations.

2. Valuation Multiples by Sector

• • Technology Companies: 6x - 12x EBITDA (sometimes higher for SaaS businesses).
  • Professional Services: 2x - 4x EBITDA.
  • Manufacturing Companies: 3x - 6x EBITDA.
  • Retail and E-commerce: 1x - 4x EBITDA based on scalability and growth potential.
• Businesses with recurring revenue models (e.g., subscription-based models) or proprietary intellectual property (IP) often command a premium multiple.

3. Private Equity Buyers

• Private equity acquisitions continue to dominate business sales globally. In 2024 alone, around 50% of medium-sized business sales were made to private equity investors.
• Some trends highlight private equity focusing on businesses with proven cash flow, scalable models, and succession-ready leadership.

4. Revenue Level Where Most Sales Occur

• Businesses with £5M to £50M revenue are most commonly acquired globally because their scale appeals to both strategic buyers and private equity.
• Small businesses (under £5M revenue) have a lower sale probability without clear profitability or growth potential.

5. Common Exit Routes

• Strategic Buyers (49%): Larger corporations purchasing smaller companies to expand market presence, product lines, or capabilities.
• Private Equity (31%): Firms looking for a strong return via an eventual resale or recapitalization.
• Entrepreneurial Buyers (15%): Individuals or small groups buying a business to operate it directly.
• Employee Buyouts (5%): Transferring ownership to employees through mechanisms like an employee stock ownership plan (ESOP).

6. Timing of the Sale

• It takes 6 to 12 months on average to sell a business, but companies that are well-prepared (with clean financials, processes, and growth plans) can close faster.
• Businesses sold during economic upswings or industry growth cycles often fetch 20% to 30% higher valuations.

7. Valuation Drivers

• • Revenue Growth: Solid year-on-year growth (above industry averages).
  • Recurring Revenue: Subscription-based or multi-year contracts are highly attractive.
  • Profit Margins: Higher-than-average EBITDA margins (industry-specific benchmarks matter here).
  • Unique IP/ Patents/ Capabilities: A business’s differentiation is a critical factor in competitiveness.
  • Leadership Team: A strong, independent leadership team who can operate after the sale increases its saleability.

8. Failure to Sell

• • Unrealistic valuations (overestimating value by owners).
  • Poor financial records and lack of transparency.
  • Dependence on the owner (absence of autonomous teams and operations).
  • Lack of future growth plans or documented systems.

9. Demographics of Sellers

• • By 2023, over 70% of small to medium-sized businesses globally were owned by individuals aged 55 and above, who are reaching retirement age.
  • This generational shift is causing a wave of business sales alongside an influx of businesses entering the market, creating competitive conditions.

10. Cross-Border M&A

• Globalisation of M&A has deepened, with 40% of deals in 2023 involving an international buyer or investment group.
• Technology businesses and manufacturing firms are the most traded industries cross-border, particularly between North America, Europe, and Asia.

11. Preparation for Sale

• Businesses prepared for sale (e.g., those that have utilised an exit strategy framework) often sell for 20% to 40% higher valuations than their unprepared counterparts.
• Tools like Vivid Vision and One-Page Strategic Plans are powerful for boosting perceived value.
• Financial health and clean books alone can shave 3-6 months off the sale process timeline.

Key Takeaways:

• Preparation is Everything: Investing in Scaling Up strategies and exit readiness will boost probability and valuation.
• Know Your Multiples: Understand and benchmark your business against typical EBITDA multiples in your sector.
• Recurring Revenue is King: If a buyer perceives stable, predictable cash flows, they’re likely to pay a premium.
• Plan Early: Begin the exit strategy at least 3-5 years before you realistically want to sell to maximize value.

Need help preparing your business for an exceptional exit?  Learn more about our  Scale to Sale Group Coaching programme and how it could benefit you in terms of maximising the value of your company and most importantly enjoy the process.