Preparing a Business for an International Sale

The UK, with its global market access, skilled workforce and established legal protections, represents an attractive market for many overseas buyers. According to data from the London Stock Exchange Group (LSEG) Deals Intelligence, the UK is the third-most targeted country for global mergers and acquisitions, representing a real opportunity for British business owners. 

However, international buyers are highly selective. Deal activity tends to be clustered around specific sectors, and overseas investors often pursue clearly defined strategic objectives. To stand out in a competitive global marketplace, sellers must be proactive and well prepared.

With that in mind, we discuss the key steps owners can take when preparing a business for international sale, along with the potential benefits and pitfalls this strategy can bring. 

Why do overseas investors buy UK businesses?

When preparing a business for international sale, it pays to understand the key drivers that make UK companies attractive to overseas buyers and investors. They include:

• A stable legal and regulatory framework, with strong property and shareholder protections and the predictable enforcement of contracts

• Access to global markets, including trade in North America, Europe and the Commonwealth

• Strong innovation and research and development capabilities, along with well-protected intellectual property

• A strong entrepreneurial culture and a vibrant SME ecosystem that creates diverse opportunities for investors

• High-quality management teams and a skilled and multicultural workforce

• Long-term growth potential, with resilient domestic demand, opportunities for expansion and multiple exit routes

What are the pros and cons of selling a business to international buyers? 

Selling a business to an international buyer is not for everyone. It adds complexity and risk to the transaction and reduces the likelihood of a quick exit. However, it can also bring significant benefits. 

Pros

• Access to a larger buyer pool - Broadening your buyer pool, particularly for niche or specialised businesses, can boost competition and valuations. 

• Higher valuations - With business valuations typically higher in central Europe and North America, the prospect of punchy EBITDA multiples can be an attractive prospect for domestic business owners.

• Strong demand for UK assets - With a reputation for being well-run and having consistent demand, UK businesses often remain attractive to overseas buyers, even when domestic markets soften.     

Cons

• Increased complexity: Cross-border transactions often involve extended timelines and the additional complexity associated with working across multiple legal and tax jurisdictions.

• Cultural challenges - Differences in communication styles, decision-making and negotiation techniques can lead to misunderstandings and increase the risk of transaction failure or fatigue.

• Intensive due diligence - The unfamiliarity with domestic risks and compliance requirements can lead to more thorough due diligence. That can put greater pressure on business owners and management teams during the transaction.  

Is my business suited to an international sale?

Generally speaking, selling a business to international buyers could be advantageous if your operation is easily scalable, already generates some overseas revenue and has export potential. It should also have documented and repeatable processes and a low level of owner dependency. Strong intellectual property is a core driver of value for international buyers, so any IP assets you have must be well-protected. 

On the other hand, if speed and simplicity are your priorities, a domestic buyer will likely be a better fit. That’s particularly the case if your business serves a local market, relies heavily on the owner’s knowledge and relationships and has limited scalability. Lower-value companies are usually also more suited to domestic buyers due to the transaction costs involved.   

Five international business sale preparation steps

When selling a business to international buyers, those who plan early, engage experienced advisors and understand the tradeoffs are best placed to prosper. But what other international business sale preparation steps should you take?

1. Reduce owner dependency

International buyers look for businesses that can operate independently of the current owner. Putting a strong management team in place and creating formal, documented processes and systems will boost buyer confidence that the business can perform without you. 

2. Address legal or regulatory compliance concerns 

Given their unfamiliarity with the UK market, international buyers are often sensitive to perceived legal or regulatory risks. Therefore, it’s worth conducting a thorough review to remove any uncertainty. 

Areas to review include:

• Shareholder agreements and corporate structure

• Customer, supplier and distributor contracts

• Employment agreements, incentives and termination obligations

• Licensing agreements

• Intellectual property ownership and registrations in key international markets
  
  

3. Adjust your valuation

Recent data suggests mid-market EBITDA multiples in the UK and Ireland average 5.1. That compares to 5.65 in Central Europe and 5.35 in France. In the US, median purchase price multiples are around 7 to 8 EBITDA for small to mid-market deals. That illustrates the potential benefit of an international sale and the importance of obtaining a professional UK valuation and adjusting it accordingly.  

4. Build international networks

Establishing connections with prospective partners, suppliers and customers in different countries can attract buyers and demonstrate the business’s ability to operate in new markets. Attending trade fairs, conferences and industry events overseas can help you build those key connections and expand your network. Exploring collaborations and strategic partnerships with overseas firms in your industry is another way to get noticed. 

5. Get ready for enhanced due diligence

International buyers typically conduct more extensive due diligence than domestic investors. This is particularly true in the American market, where buyers are known for their rigorous checks. These can be thorough and time-consuming, so preparing early will help you maintain momentum through the transaction process and reduce the risk of any last-minute surprises. 

You should expect:

• Extensive financial, legal, operational and ESG reviews

• More detailed information requests

• A greater focus on compliance and governance

Positioning your business for a successful international sale

At Eddisons Business Sales, we have extensive experience providing advice and practical guidance for owners who want to explore selling their businesses to international buyers.

If you want to discuss whether your business is well-suited to an overseas sale, we can provide tailored advice, a professional valuation and end-to-end support throughout the transaction. Find out more about selling your business and how our process works, and get in touch to explore your options.