Last month, veteran leasing specialist Jeremy Hall sold Wyse Leasing, the
lease brokerage business he founded 20 years ago. Here he says
knowing what buyers really want is key to such sales.
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Our local HSBC branch has recently seen an unprecedented demand
for new business bank accounts, suggesting that redundancies –
although potentially devastating – can provide the catalyst some
budding entrepreneurs need to start up a business for
themselves.
Although many new enterprises do not reach the
ripe old age of three years, those that do often provide their
founders with better earning expectations and quality of life than
they would have enjoyed under their previous employer.
What is interesting, however, is that while
many will have carefully detailed objectives, very few will have
set out their exit strategy prior to opening their doors for
business.
When I was aged 24 and founding the brokerage
Wyse Leasing, my thoughts were exactly that: make a profit, earn a
salary, and dream about the Porsche. Selling the company was the
last thing on my mind.
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By GlobalDataHow wrong we can be. Even if your personal
goal is to have a ‘lifestyle’ business, the ultimate exit plan
should be the first item on your agenda when setting up a
company.
Simple questions need to be asked. Here are
the principal ones that should be considered by lease brokers:
• Who can we sell the business to –
competitors, lessors, or suppliers?
• When can we sell – after three
years of profits, a certain volume of lease business, or the
signing of a large lease programme?
• How much will we get for the
company, and where is the value – in the price-earnings ratio, the
net present value (NPV) of future profits, the vendor base, the
customer base, or in lease origination?
• What is the potential buyer
looking to acquire?
Having bought and sold numerous companies –
many of which were in the leasing sector – emphasis should be put
on that last question.
Information Technology Rentals (ITR) was an
acquisition we made in 1999. In this case, the attraction was its
lessee base and vendor relationships. Our acquisition of Total
Asset in 2000 was intended to significantly grow volumes of lease
business written.
Finally, the acquisition of Power Leasing in
2007 was planned to springboard us into markets outside of ICT. We
also bought numerous customer bases over the years, primarily for
end of lease income.
Having sold a few leasing companies, it is
also interesting to be on the other side. In 1998, we sold Wyse
Leasing to a NASDAQ-listed IT company which wanted to add our
profit to the group.
The buyer had a price-earnings ratio of 20:1,
so for every £1 of profit we made after amortisation of goodwill,
we added £20 of value to the share price. We later bought back Wyse
Leasing after the bubble burst, probably due to these inflated
price-earning ratios.
The key driver in the sale of Wyse Leasing
North in 2006 was the NPV of future profits. The recent sale of
Wyse Leasing had other key drivers.
Prior to the sale we had been approached by a
number of companies looking to acquire Wyse.
They had included a lessor that wanted to add
a brokerage to its business model to deal with internal rejections;
a financial services company that wanted to acquire a leasing
broker to cross-sell factoring and invoice discounting; a private
investor; a large IT company looking for an in-house leasing
operation; and even a foreign exchange company.
It goes to show there are many different
reasons for buying a company, and the key to the exit issue is to
work out those reasons prior to the commencement of business.
Building the business plan around those key
drivers can mean the difference between selling your company or
not.
The author was the founder of
Wyse Leasing and is currently CEO of WestWon Capital
