Advice from Entrepreneurs: How to Sell Your BusinessSeptember 03, 2017
Thinking of cashing out? Entrepreneurs explain routes to a successful exit and experts identify what attracts buyers
The sale of a company is a major milestone for any business owner. But what happens next? “There is a little bit of seller’s remorse that occurs. You’ve spent years building a business, and it is your baby,” says Stephen Chandler, co-founder of email security company MessageLabs, which was sold to Symantec in 2008 for $700m (£550m).
MessageLabs enabled emails to be scanned for viruses and malware in the cloud before they reached a person’s inbox. Its 20,000 plus business clients included the Bank of England and the Federal Reserve.
Chandler initially explored a stock market flotation. But, with the financial crisis on the horizon, a trade sale seemed the better option. After a month of talks, an agreement in principle was made with US software company Symantec. Then began the arduous due diligence process in which MessageLabs faced questions from its buyers, lawyers and company personnel. “[It was] formidable, to say the least,” says Chandler. Symantec had around 100 working on the sale, while there were only four involved on MessageLabs’ side, including Chandler.
The business was sold just as Lehman Brothers was collapsing and global stock markets fell. But the deal was briefly delayed while Symantec’s board meeting was called to discuss the crash. “After keeping us stewing for an hour and a half, they came on the phone and said they were good to close the deal. Then there was euphoria,” says Chandler. “It was a life-changing amount of money for a lot of our staff.” Most employees held share options, and several held shares too.
In 2009, Chandler co-founded the venture capital firm Notion Capital, which backs companies in the SaaS (software as a service) space. He enjoys advising businesses, enabling them to grow and be acquired.
Two other entrepreneurs who’ve enjoyed a successful exit are husband and wife team, Joe and Wendy White. They were the co-founders of website-building business Moonfruit. The business, which launched in 1999, narrowly survived the dotcom crash of 2001. By 2011 it was a major player. Buyer interest was growing and the founders decided it was time to cash out.
The Whites appointed Californian bank Viant Capital to court buyers and manage the selling process. They chose an American bank as the companies that had shown interest in Moonfruit were US-based. Joe says finding an experienced party to do this was wise choice. “When you are selling your first business, the number of [business] transactions you’ve seen is precisely zero. Yet you are going up against corporate development teams, who might be acquiring four to five companies per year.” He adds that bankers typically take a share of the transaction value from the sellers, in this case Moonfruit’s shareholders.