December 16, 2021
Small and medium-sized businesses often find themselves struggling to decide upon which strategy they should implement to scale. Should they seek to grow organically or inorganically? If inorganically, should they sell up or raise finance? If they look to raise finance, should this be through equity or debt? If equity, what type of investor and how much should they be raising? The questions and options available are almost infinite, and it can be a stressful task for anyone analysing and determining which is best.
In this piece, we will consider some of the more common types of equity investors, as well as how the landscape for acquisitions and investment has changed because of the COVID-19 pandemic.
Angel investors are typically approached by early-stage businesses that have never run a formal investment process before. They are high net worth individuals who can offer advice and connections and can be more flexible in their approach than more institutional investors. In addition to individual investors, there has been an increase in angel groups, which are groups formed by several angels to make investments.
Venture capital (VC) is a form of private equity investment for early-stage businesses, demonstrating strong, long-term potential for growth. Whilst VCs range in what stage of the business lifecycle they will invest, it is most common they will participate in Series A, B and C rounds (once the business in question has developed a track record and is seeking more meaningful investment to scale).
Corporate VC is where large firms take an equity stake in small businesses, where they may also leverage the parent company’s assets to help propel growth. The aim of these types of investments is to help the corporate firm establish a competitive advantage, and they are becoming more and more common, especially with rapid advancements in technology driving the need for innovation.
The impact of COVID-19 on acquisitions and investments
Following an extremely volatile period last year, which saw many businesses struggle to navigate the new norm and many others successfully ride out the storm, there has so far been a strong rebound in 2021. While deal volumes in Q1 2021 have risen to levels higher than that of before the lockdown, deal processes and structures have largely been impacted by COVID-19.
With increased risk in carrying out deals during any period of uncertainty creative deal structures are becoming more and more common to allocate risk and mitigate any potential downside. Specifically, when it comes to acquisitions, we are finding more than ever that buyers are less willing to pay for assets entirely upfront. Rather, the inclusion of some sort of deferred consideration or earn-out structure is very much becoming the norm.
Valuing businesses during such a volatile period is extremely difficult for buyers and investors as the historic performance of the business in question is no longer a reliable measure of its future performance. In assessing what a fair valuation should be, buyers / investors need to determine the true underlying performance of the business in question. Where a target’s business has been adversely affected by COVID, it begs the question as to whether it can return to its pre-pandemic levels of performance. Equally, where a target’s business has been positively affected by COVID, one must ask how sustainable this ‘COVID boost’ really is.
Finally, buyers and investors engaged in deals during this period will pay more attention to not only the impact the pandemic has had on the target (financially and operationally), but also the steps the target has taken to respond to avoid disruption. The latter will help them establish how well equipped the target is to handle a similar situation in the future, or more relevantly, further waves and lockdowns as we navigate ourselves out of it. Hence, it is important for business owners to ensure they are prepared for rigorous questioning on this front. Evidently, the most prepared one is, the more attractive their business will look.
Although COVID has certainly had an impact on deals, deal appetite remains strong and it is expected there will be plenty more activity in the months to come. If you are therefore looking to sell your business or raise funds, it is an apt time – just ensure you are adequately prepared for the process may be different. If you would like assistance to make the process as smooth as possible, get in touch with us today via this link or email us at email@example.com
“We were delighted with the services that Bluebox offered us. Bluebox’s attention to detail through their Diamond Programme ensured that we were well prepared for when the business was taken to market and that the sale process itself was managed expertly.
We challenged Bluebox with finding the right strategic buyer and thereafter negotiating a deal that met our requirements. In helping initially to identify and to secure the deal with Mountville Mills they accomplished just that. Communication throughout was excellent and professional, managing each stage of the process. I would have no hesitation in recommending Bluebox to any corporate shareholder or private business owner looking to divest their business.”
Richard Millward, Former Client
“We were delighted with the services that Bluebox offered us. Bluebox were challenged with finding us the right strategic investor and, thereafter, negotiating a deal that met our complex requirements. In identifying and securing the deal with LGC they have done exactly that. The process itself was efficient and smooth, largely due to the excellent communication from the Bluebox team, who also demonstrated excellent experience at managing a very engaging auction process. I would be delighted to recommend Bluebox to any corporate shareholder or private business owner looking to divest a business.”
Helen Dickinson, Former Client
It has been a real privilege working with the team at Bluebox over this last year or so. Bluebox’s attention to detail ensured that we were well prepared for when the business was taken to market and the sale process itself was managed expertly. Starting the process, I had no idea exactly what this would entail and the volume of work that has been produced by everyone and the result reached today is nothing short of brilliant.
Hugh Morris, Former Client
We are delighted with the services that Bluebox was able to offer. They showed an intimate knowledge of a deal cycle, managed a tight auction process and were highly communicative from the start. I would happily recommend Paul and his team to business owners contemplating a sale of their business in the next 24 months. Experience is key and this has paid off for us.
Laurence Seward, Former Client
Aligning ourselves early with Bluebox, and entrusting the team to guide us through their process proved to be a highly rewarding investment from all viewpoints. Bluebox’s support significantly enhanced both the value of our business and its ‘saleability’. I would highly recommend Bluebox to business owners contemplating an exit in the next two years. The earlier the engagement the better so far as I am concerned.
Mike Minett, Former Client
We began working with Bluebox in early 2015 through their Blue Diamond Programme, as we were contemplating an exit. We found that the process focussed our minds on the key areas of growth in the business, and prepared us well for the inevitable rigours of due diligence. During the sale process itself, the advice offered by the Bluebox team was invaluable. We found them to be helpful, straightforward and honest.
David Stokes, Former Client
When selecting our adviser, it was extremely important that they had access to international buyers and were experienced in cross-border M&A. The team at Bluebox proved to be invaluable by identifying a strategic acquirer from America who was not known to us and by negotiating an excellent deal for all parties. I was also impressed with the process management from Bluebox, which ensured that the deal was closed in a timely fashion.
Jeff Weinstein, Former Client
When I first engaged with Bluebox, I was hesitant as to the benefits of using an advisor to firstly, find a buyer for my business and secondly, to get a deal over the line. However, now that the deal has completed with KPM, I can honestly say that the finer negotiation points handled by Bluebox and their overall management of this process has been nothing short of first class. I would be delighted to recommend Bluebox’s services to any entrepreneur contemplating the sale of their business.
Bill Ballard, Former Client
Bluebox worked closely with us over the following six months and helped us to implement some key initiatives which made InferMed a more attractive acquisition target. Once we decided to sell the business, the Bluebox team were very diligent in ensuring that no stone was left unturned. They negotiated expertly on our behalf to ensure we got the best deal possible.
Alan Montgomery, Former Client
The pre-sale planning programme that we signed up for with Bluebox made us develop our strategies and focus on the bigger picture. It proved to be a very rewarding investment from all viewpoints and significantly enhanced both the value of our business and its ‘saleability’. I would highly recommend Bluebox to business owners contemplating an exit in the next two years.
Nigel Parsons, Former Client
I have experienced first hand the value that can be created through highly structured pre-sale planning. It amazes me that it is not something that everyone does. It is so disappointing to see around 90% of transactions collapse before they complete and pre-sale planning will not only enhance your price, but also significantly enhance your chance of a closed deal.
James Caan, Investor
We worked incredibly closely with our advisers who provided expert knowledge of the sale process with which we were not familiar. We were truly delighted with the results.
Marten Nielson, Former Client
We appointed advisers to manage the sales process after we had received a number of unsolicited approaches for the business. I was incredibly impressed by the immense value that could be created by expertly negotiating with a group of already interested parties.
Paul Duckworth, Former Client
I was delighted with the service that the team offered and their real attention to detail. The deal was not without its complexities and it was reassuring to have such experienced advisers assisting me throughout the negotiations.
Peter Bennett, Former Client
Truly delighted with the way my sale process was managed. The fact that the team I worked with achieved such a great multiple is testament to their experience and their ability to create some true competitive tension.
James Averdieck, Gü, Former Client
The team at Bluebox provided invaluable support in negotiating this complex transaction. Their access to international purchasers, and exceptional knowledge of cross border M&A ensured that the deal was concluded efficiently, achieving a highly successful outcome for us all.
Jon Parslow, Former Client
“We selected Bluebox after a fairly long round of evaluating potential advisors because of their scientific, yet challenging approach to maximising value. During our initial meetings they showed us how far short of “ready” we were and consequently we completed more preparation in the early stages which meant we were equipped for what was to come. We were delighted with our choice of Corporate Finance partner. I do not hesitate in recommending Bluebox for any SME to consider.”
Simon English, Former Client
Bluebox provided invaluable advice in managing the negotiations with incoming investors. Their skills in handling these discussions were evident from the outset and the vital interface that they provided between the incumbent team and the incoming investors was truly beneficial.
Henry Braham, Former Client
Bluebox have a professional, dynamic and experienced team that is greatly assisting me with my focus on my exit within the next 24 months. Their structured approach is very refreshing and their ‘Blue Diamond’ programme is adding immense value.
Matt Evans, Former Client
The team at Bluebox provided me with a seamless service from the start of the engagement until our deal was completed. Attention to detail was commendable and their understanding of corporate M&A very impressive. I could not recommend them highly enough.
Victor Lewis, Former client
Having tried to sell my business previously – and failed – I was only too aware of the importance of pre-sale planning. This is a talented team offering a service that most people find out about, but too late.
Simon Hulme, Former Client
Bluebox are a quality outfit. Their access to International acquirers and relationships with the highest quality domestic investors was impressive. My shareholders and I received excellent service from start to finish and it was refreshing to be dealing with a senior team throughout the sale exercise.
Michael Clapper, Former Client
I cannot recommend the team at Bluebox highly enough. Their expert guidance throughout the entire sale exercise resulted in my shareholders securing an excellent deal with which the entire team was delighted.
Mark Rodol, Former Client
I’m really pleased with the service Bluebox provided. The team demonstrated excellent knowledge of the process to follow and led negotiations for the hospital in a way that allowed us to ensure we received appropriate value whilst focusing on reputational risk. Communication and service were of a very high standard.
Steven Davies, Former Client
With Bluebox’s expert advice we were able to find the right buyer that will benefit our business strategically. We’re delighted with the outcome and look forward to starting our new chapter
Clive Hillier, Former Client
The advice offered by the Bluebox team throughout the process was invaluable to the shareholders. We strongly believe that participating in Bluebox’s pre-sale planning programme was a significant driver behind the success of the deal. Their project management and negotiation skills throughout the sale process itself resulted in an exceptional deal being delivered to all parties involved.
Harpal Singh, Former Client