Our Managing Director, Jordan Greenaway, recently contributed to Rapport magazine, Langleys Solicitors’ new publication for high-net-worth individuals. Langleys is a law firm that advises a range of different private clients, from farmers and landowners, to large commercial organisations. 

You can read Transmission Private’s article, which focusses on the challenges high-net-worth individuals may face when selling their business, in the latest physical edition of Rapport magazine – but we have enclosed a full copy of the article below for people who cannot get their hands on a copy. 

We also encourage you to visit the Langleys Solicitors website to read their latest content, news, and insight, as well as find out more about their expertise and services.

Selling up and your reputation

It’s safe to say that virtually everybody has been impacted by the events of the last year and more. For many entrepreneurs, business owners and family businesses, the pandemic has prompted, or at least accelerated, discussions among themselves on succession and the selling of the business.

If you are one of them, you are not alone. A recent poll by Lombard Odier – the Swiss private bank and wealth manager – found that 50% of the entrepreneurs they polled have changed their business strategy because of COVID-19. They also found that 32 per cent have accelerated succession plans, with a further 30% speeding up their plans to move abroad.

The reality is that COVID has prompted discussions, questions about the future, and what that might look like. These complex succession issues have risen from the bottom of the long list right to the very top. The months spent in lockdown have given entrepreneurs the breathing space to sit around the dinner table and discuss this in greater detail.

With the clients I work with, I am seeing that these conversations have been more prevalent among first-generation entrepreneurs – those who have made the family wealth – and who can blame them. Coronavirus has prompted discussions about mortality, and many entrepreneurs are looking to cash in and change their lifestyle. According to the ONS, March saw the largest number of UK companies involved in M&A for 12 months, according to the ONS.

While selling a business is a moment of quiet celebration, it is also a process fraught with risks, particularly on the PR and communications side. Part of my day job is to encourage the entrepreneurs we support to be attuned to these, and secondly, to advise them throughout that long road of exiting a business.

Taking the necessary steps

If there is one thing I have learnt, it is that selling up is fraught with emotion – whether it’s ensuring their company stays true to its mission, whether colleagues and employees are protected, or making sure the business goes on to reach its full potential. It’s this emotional pull that is usually why entrepreneurs don’t want to sell. Research shows that 55 per cent of entrepreneurs say that emotional attachment to the business was their biggest obstacle to selling up.

Firstly, there is exposure. Selling up will likely cause a spike in exposure and interest from various quarters, principally from the media, employees, and the local community. And that exposure is not only on the business but also to the shareholders personally. As you might expect, certain factors accelerate that exposure – how long the business has been running for, what type of business (B2B or B2C) it is, and how identifiable the shareholders are with the brand.

This is equally applicable to businesses with a turnover of £10 million as it is for businesses with a turnover of £100 million. If you are a small and local business – that exposure might only come in the form of local media. For many family-owned and privately-owned companies, selling up is an infliction point – and all eyes will be on you. This needs to be managed.

Secondly, there is uncertainty. Naturally, a change of hands will arouse harmful speculation. Is the business in difficulty? Is this a distressed sale? Can the business survive without its founder? Is the founder in financial difficulty? Why are they selling now? We have conducted some research on this, and found that more than 40% of people would assume a business is in financial difficulty if an entrepreneur put it up for sale – or if the discussions of selling were leaked to the press.

Know the risks and prepare

Aside from the uncertainty it might cause among the wider public, selling can cause uncertainty among specific groups of stakeholders – customers, clients, suppliers, banks and other financial stakeholders, partners, and most importantly, employees. All these various groups and communities need to be effectively communicated to.

So, what can entrepreneurs do to manage and reduce these risks throughout the process? First and foremost, they need to be attuned to these risks. They exist, are live and prevalent – don’t be blindsided by them.

But most importantly, they need to communicate. This is key! Communicating the sale of a business is the most effective way to manage these risks positively and practically.

To begin with the entrepreneur needs to articulate their motivation. Announcing the sale in carefully worded language enables them to explain why they have chosen to move on, whether to focus on their family, invest in other businesses, or devote themselves to philanthropy.

It is important to get on the front foot and communicate the reasons behind the sale well in advance of it happening or before it is potentially leaked. There are usually legitimate reasons why the shareholders decide to move on – but that needs to be communicated, so falsehoods do not develop. Write the narrative before it writes itself.

Next, entrepreneurs need to safeguard their legacy. Communicating proactively and announcing the sale gives the entrepreneur the power to articulate their positive impact in the business through their ownership in their own words. Again, this is about controlling the narrative that protects their best interests.

After this, they need to communicate clearly to each stakeholder group. Many entrepreneurs won’t worry about what the wider public thinks, but they care about their network, friends, family, employees, and colleagues.

Employees come first, then the media

The most important group to communicate to starts from within – your employees. Rule number one – always ensure you tell your employees first. They would much prefer to hear the news from you than in the local newspaper. Also, internal team members are the primary source for leaks, so you must build goodwill by ensuring colleagues are kept up to date, treated respectfully, and understand the reasons for the sale. Communicate to them directly in face-to-face meetings and leverage internal channels such as newsletters and staff intranet portals.

To communicate to suppliers and partners, write and distribute a statement to the trade press to manage perceptions within your own industry. This will ensure you stay one step ahead and don’t cause uncertainty within the market.

It is also best to communicate clearly and directly to financial partners too. I would also advise treating them separately by writing and sending a stakeholder letter to keep all financial stakeholders in the loop – maintaining their confidence and backing throughout the process.

But it’s not all doom and gloom! While the challenges are vast, selling a business is a moment to recognise that you created something from nothing despite what some may have thought at the beginning. It is a legacy for yourself and your family.

My biggest takeaway: selling your business is a moment of celebration, but with it comes reputational risks too. Be one step ahead and control the narrative.