Many Owner Managed Businesses are well placed to fully unlock their potential after recent growth journeys. Our last article  introduced our overview, analysis, and positive outlook for this segment of the private sector.

In the four weeks since we started planning this series of articles, we have been appointed to recruit the CFO of an OMB in South Yorkshire that is planning on doubling turnover in 2024, a CEO & CFO for a young SME in Leeds, and a CFO for an investor looking to complete a seed capital raise in the East Midlands. Exciting times lie ahead for the existing shareholders and the incoming leaders.

We talked to Dahren Naidoo – Dahren leads the corporate team at Freeths Leeds, and personally specialises in all aspects of corporate work, including private equity transactions (acting for institutional investors, founder shareholders and management teams) and mergers and acquisitions (ranging from SMEs to larger corporate and institutional clients). He is listed as a Recommended Lawyer in the Legal 500 and a Leading Individual in Chambers & Partners.

How do you see the OMB market sector at present?

No matter what the market environment, which most will admit has been more challenging over the last 12 months, there are always opportunities for businesses that understand their sector and apply innovative business tools to advance their offering.  

This is always prevalent with OMBs – where those businesses often tend to thrive as they are usually led by sector experts that have grown up in larger organisations or institutions, and spot the opportunity for change and development. What they then inevitably need to fuel that growth is cash and further expertise, and this rounds the circle with investment/debt funds filling that hole.  There is still cash in the system to be deployed whether through private equity or growth funds, or some of the new finance houses that have grown up in the space post credit crunch. An interesting development in the last 2-3 years is a more willing approach to implement other structures that may fuel that growth outside a traditional MBO, for example the use of vendor assisted buy outs, or the use of employee ownership trusts.  

It feels like we are in a market where if the business is good, led by good people, and has a good structure around it, the “deal” structure will fit around that (as opposed to the other way round). This flexibility means that transactions are still occurring and we expect them to continue in this way.

‍How important is it to have the right team in place before planning the next stages for the company’s development?

Having the right team in place prior to any business change event (whether that is an exit, refinancing, investment or otherwise) is crucial for the obvious reasons of business structure, but also to demonstrate confidence to a potential partner that the strength of the business is not concentrated. Whilst we live in a technologically advanced system, people still buy people to a large extent, so having a strong and experienced team is crucial to helping the credibility of any business in the eyes of a partner.

We also spoke to Vickie Brown to get a CFO’s perspective on planning for exits. Vickie is one of the most highly regarded CFOs in South Yorkshire. She worked with the founder of Custom Solar to exit to Mitie in 2022 and has just overseen the exit of Special Melted Products from Mutares to Cogne.

"Recruiting a strong finance professional 18 months before a transaction will give you the best opportunity to set your stall out and decide on your preferred exit route, (although it can be done in less time when required, my last two transactions have completed in less than 12 months from recruitment to sale). As part of any due diligence process your data will be reviewed in detail and potentially the value reduced if you haven’t got all the required information.

An experienced Finance Director will ensure that your information is correct and up to date. P&L (hopefully) showing positive trends, an accurate balance sheet, robust corporate governance, (CH filing, tax returns, company books up to date), contracts signed with key suppliers, major customers and employment contacts / retention packages with all your key personnel. They should bring clarity on your business drivers and what adds value to your business in order to maximise your return.  

A good Finance Leader will help the senior team form a strong growth strategy, with a clear achievable plan for the future success of the business. This will include not just a fully costed financial projections, but also market analysis and succession planning. The ability to communicate this business plan is vital, what you are selling is the future success of your business."

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In our next article we will be talking to a former Emerging Dealmaker of the Year in South Yorkshire, and an OMB specialist CFO - looking at some of the considerations for planning the timing of the exit for the business.

Our team have a depth of knowledge & experience to advise shareholders. We can also introduce them to the right advisers and plan to ensure that they optimise their people plans to unlock their full potential. Please contact Nik Pratap if we can help you.