This week on Built to Sell News, we’re covering how to:
- Walk away (to get what you want)
- Re-imagine your role as chief checker
- Make consistently great decisions
- Guarantee you get what you want out of a deal
- Stop undermining your negotiating leverage by avoiding one common mistake
This week, we published a Built to Sell Radio interview with Mark Wright. In 2014, Wright won the UK version of the reality TV show The Apprentice. The prize included a £250,000 investment from Lord Alan Sugar. In exchange for his investment, Sugar took a 50% stake in Wright’s digital marketing agency, Climb Online.
Under Sugar’s mentorship, Climb Online flourished, eventually becoming one of the largest digital marketing agencies in the UK with a workforce of 130 employees at its peak. In 2022, Climb Online was acquired by xDNA, a global digital agency group, for a value that amounted to 9.5 times its EBITDA. Admitting that he was an entrepreneurial novice when he started working with Sugar, Wright described five lessons he learned from the business legend:
- The Strategic Walkaway
At one point during the negotiation to sell Climb Online, the discussion was getting heated. Sugar believed the other side was being unreasonable and instructed Wright to tell them to “f-off” and walk away. Wright was hesitant, given that Climb Online represented the bulk of his wealth and he did not want to jeopardize the deal. Sugar insisted, and two days after Wright told the other side they were walking away, the acquirer came back and accepted the terms in question.
Sometimes, you have to be willing to walk away from a deal, which is also what Dave and Carrie Kerpen did in order to get the structure they wanted.
- Be Chief Checker
In the early days, Wright was doing everything inside his business, from recruiting employees to winning business. However, Sugar coached Wright to change his ways and imagine his role as “Chief Checker.” Instead of getting involved with a pitch or managing a big customer, Sugar told Wright that his job was to inspect what he expected, but not do any of the work himself.
Planning to make the shift from doing to inspecting? VidGuide can help you explain how you want things done inside your company. Grab a free 7-day trial.
- Plan to Sell in 5 Years (from the start)
Sugar advised Wright to make decisions in his business from the start as if he planned to sell in five years. Sugar reasoned that if Wright was always planning to sell on a reasonably short time horizon, he would make better choices.
Sugar advised Wright to think of his business from the perspective of a potential buyer. What would a buyer be looking for in a business? What kind of financials would they want to see? What kind of team would they want to inherit?
By thinking about these things from the start, Wright was able to make better decisions that would ultimately make his business more valuable. He was able to build a strong team, improve his financials, and position his business for a successful sale.
Timo Armoo adopted the same forward-thinking strategy when he started Fanbytes, his influencer marketing company. He viewed his business through the lens of potential buyers right from the start, ultimately selling to Brainlabs for 3x revenue five years post-launch.
- Be Clear on Your Minimum Number
Sugar went into the sale of Climb Online knowing he wanted at least four times EBITDA for his share of the company, so was delighted when Wright was able to negotiate a deal worth 9.5 times EBITDA. Sugar didn’t make the mistake of telling potential acquirers of his minimum number, but he was clear in his own mind and with his partner. Since Sugar told Wright his minimum number, it gave Wright a floor he knew he would have to improve on if Sugar were to accept the deal terms.
Mac Lackey also used his minimum number when his partners approached him with abuyout offer for his company, ISL Futbol.
- Don’t Neuter Your Advisors
Wright had a team of advisors representing him in the sale of Climb Online to xDNA. However, at one point, he shared his WhatsApp contact information directly with the acquirer. He thought it was a good idea to open up a direct line of communication with the acquirer, but soon their friendly text exchanges became more serious. The acquirer started to communicate their stance on critical deal terms, effectively attempting to bypass Wright’s advisors. The messages threatened to undermine Wright’s team’s ability to push for the best deal possible.
By contrast, Sugar, who has sold more than 60 companies in his career, leans heavily on a family office of lawyers to advise him on deals. He knows that it is important to have experienced professionals who can protect his interests and ensure that he gets the best possible deal.
📽️ Clip of the Week
In this video clip, Wright reveals the rebuttal he used when a prospective acquirer proposed an earn-out.
📣 Quote of the Week
” When you do business with serious advisors and serious companies, they don’t build in all of the nonsense because they can afford the deal.”
– Wright explaining the benefits of working with an experienced advisor when selling your business.
🏆 A Trophy For Football (Soccer) Fanatics
Indifferent to material possessions, Wright chose to celebrate the sale of his business by getting tickets to cheer on the Socceroos in the 2022 FIFA World Cup held in Qatar. He shares the story at the 58:07 mark of the podcast.
📈 Recent Deals
- The Wall Street Journal has reported that KKR and HarperCollins are in the running to purchase book publishing company Simon & Schuster. This comes after the Department of Justice thwarted Simon & Schuster’s attempted sale to Penguin Random House in 2020, a deal that was valued at $2.18 billion.
- Simulations Plus, a leading pharmaceutical modeling and simulation software provider, has acquired Immunetrics, a company that speeds up drug development in growing therapeutic areas like oncology, immunology, and autoimmune diseases. The purchase agreement involves a $15.5 million upfront cash payment, including a $1.8 million hold-back, and up to $8 million in future earn-out payments based on Immunetrics’ revenue performance through to the end of 2024.
- Heimbach Group, a leading supplier of paper machine clothing, has been acquired by Albany International Corp. in an all-cash deal valued at approximately €153 million. The transaction also includes the assumption of Heimbach’s €21 million net debt.
Do you have a connection with a founder who recently sold their business and has a story worth sharing? If so, we’d love for you to nominate them.
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This Week’s Contributors
Colin Morgan, Executive Producer of Built to Sell Radio, John Warrillow, Host of Built to Sell Radio, Daphne Parsekian, Copy Editor, and Denis Labataglia, Audio Engineer.
