Professional Services
Management & Strategy
Simon Hulme

Making an exit: the myths and realities

Selling a business can be a fraught and stressful affair. But it doesn’t have to be, says serial entrepreneur and Card Connection founder, Simon Hulme. Get expert help from a top M&A expert, secure a straight-dealing buyer, and keep your business clean and ready to sell.

Simon Hulme knows exactly what it’s like to sell a business. The serial entrepreneur, lecturer and business mentor has done it twice, having created Frame Express and Card Connection from scratch and then selling them on.
Disposing of a business can be a long-winded and stressful affair. The two things you must do are to retain a top-flight mergers & acquisitions (M&A) adviser and secure the right buyer – one who is straightforward and dependable. Keep a weather eye on economic conditions too. Simon has direct experience of how these can make themselves felt.
Simon started up Frame Express, a fast turnaround picture framing business, in 1984 with a friend. He was 24. The company grew rapidly, with 16 shops in and around London and, at its height, 125 employees. He then sold it to a listed company, the Oliver Group, in 1989 for £1.75 million. His second business, Card Connection, a franchised greetings card publisher, came into being in 1992 and Simon sold it for an undisclosed sum to UK Greetings in 2008, at a point when annual net profits stood at £1 million on £7 million sales.
Economic cycle
Simon had been running Card Connection for some 15 years when he decided to sell. The card industry was showing signs of decline, plus consolidation in the retail market was eroding the position of some of the independent retailers on which Card Connection depended, adding pressure to the business. And after 15 years as Chairman and Managing Director, then Executive Chairman he was also ready for a change. “I found that I was weary and bored. It was the right time for me to sell.”
Expert advice
Simon knew the future for his business lay with a bigger player, like the UK arm of American Greetings (AG), so he appointed an M&A agent to make an approach. But the agent failed to approach UK Greetings and while he did secure the interest of a private equity group, Simon found them hard to deal with. The deal then fell apart in the wake of the 2007 collapse of Lehman Brothers. Simon took matters into his own hands. He called the Chief Executive of AG in the UK personally, and appointed a partner at another M&A advisory firm to handle the negotiations.
The deal process
There followed protracted discussions over the Heads of Terms, and the handing over of financial data. Worsening economic conditions only added to the mix. “The company was performing well, but I was concerned that the market might deteriorate, the deal might suffer and the price might be driven down.”
In fact, under the circumstances, the new advisory partner managed to negotiate a fair price. Simon’s original valuation was based on looking at the accounts and arriving at a multiple of the EBITDA (a broad measure of operating cashflow based on earnings before interest, tax, depreciation and amortisation).
“Generally, you might expect an offer to be five times EBITDA or more, if the business is growing and if there are opportunities for cost savings,” says Simon. “Acquirers should share that benefit with the seller in the form of a higher multiple. And this is why generally a trade sale is so much more profitable for both parties.”
Having renegotiated on price, the deal progressed to the due diligence process. Once finalised, there was a further delay, since AG wanted to wait until after their parent company’s year-end in February to complete the deal. “They were very good, straightforward buyers,” he says.
The sale process proved an enormous distraction for Simon, but he continued to focus on the business. “A lot of people run the business down over the course of a sale. I resisted that and we did our very best to help the business to stay running as it should do,” says Simon.
Preparing for sale
The deal was helped by the fact that Simon was able to provide clear financial information on a well-run business. It’s a principle he now emphasises to others in his current role as a business mentor and lecturer at University College London.
“You don’t want your lifestyle mixed up with your business. I always say to people, ‘Keep your business clean so that if someone comes along to buy it, they can see clearly what the business performance is’. To reduce their tax bill, people are tempted to put personal expenditure through the company. They then have to say to a buyer that the business is actually more profitable than it appears. That’s unacceptable and they’ve actually set up a tax liability that the buyer will potentially have to take on. Keep your business squeaky clean.”
Life after the deal
Having finally handed over Card Connection, Simon found the aftermath of selling up brought fresh challenges. Having sold a business, one can be left with plenty of cash in the bank, but it can be difficult to know where to invest next, especially when stock markets are struggling. “I now have a combination of business angel investments, a stock portfolio and property,” says Simon. “A very common mistake to make is to rush into investing in another business. I and others have lost money that way.” Clearly, having a strategy of diversified investments, and taking your time about it, remains critical to moving ahead post-deal.
Five business lessons

  1. Know your target. Don’t waste time chasing prospective buyers that won’t have the clout or the potential to take your business forward.
  2. Be squeaky clean. Transparent finances can appeal significantly to a buyer.
  3. Be patient. Discussions, number-crunching and due diligence are crucial, although they can feel interminable. Don’t rush the deal through at the expense of ironing out every last wrinkle and risk tripping yourself up further down the line.
  4. Have experts on hand. Hiring someone dependable, knowledgeable and able to translate the complexities of deal negotiations will allow you to focus on maintaining the success of the business you’re trying to sell.
  5. Once you struck a deal and have moved on, remain cautious, clear-headed and open to expert advice. 

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