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Entrepreneur: Peter Hickey, Founder and Managing Director
Company: Maus Business Systems
Business type:
Turnover: $5M - $10M
Head office: North Sydney, New South Wales
Contact details: (02) 9957 3827;
Web site: www.maus.com
The Maus Business Systems Story
Halfway through 1999, award-winning entrepreneur Peter Hickey decided that he wanted out of his business. He was 37 and his fast-growing company - Maus Business Systems - was nine years old, with an annual turnover of $4.3 million. Hickey had worked hard and paid himself well, but he wanted to take some capital out of the business. He says: “I could have borrowed more money from the bank to keep the business growing but they kept wanting my house for security.”
Growth prospects were good. Maus develops business-planning systems and other financial and human-resources information for small and medium-size businesses. The product was distributed via manuals and software.
Hickey considered his options: floating, being acquired, or taking an equity injection. He says: “A minority investor would have been good but I would have had to run the business on a much more formal basis. The capital injection was not worth it.” Floating was out of the question as Maus was too small.
In the end, Hickey decided to sell the business. He says: “A sale gives maximum value for the company with a security-free workout period.”
Hickey appointed accountants Deloitte Touche Tohmatsu to find a buyer. Although they helped him become investor-ready, he ultimately found his own suitor by networking. He met an employee of the financial services publisher CCH at a ball. The employee told Hickey that CCH, a subsidiary of multinational Wolters Kluwer, wanted to enter the small to medium-size enterprise business information market. Negotiations took more than a year and were a “nightmare”, Hickey says.
But Hickey is delighted with the deal. He received well over $10 million, the company was given a large equity injection and it now has access to CCH’s distribution network in 26 countries. Hickey is staying on as managing director of Maus for three years and he expects turnover to reach $20 million. He says: “By then, I will be 41 and I expect I will never have to work again.”
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Key learning points:
- Business buyers - In a risk-averse financial climate, buyers and investors are looking for revenue certainty. Businesses must be able to prove they have a strong customer base.
- Business plan - The first page should be concise enough for an investor or buyer to get a complete picture of the opportunities. The rest of the document should address their concerns.
- Intellectual property - Make sure that the company owns all its intellectual property - and that you have documents to prove it. Have all contracts up to date, including employee contracts. Buyers pay more for certainty.
- Business-sale bargaining - In negotiations always stay in contact with the principal of the other company. Do not let accountants and lawyers represent you at meetings. The value of a company is based on the strategic fit and the level of excitement it generates in terms of future growth for the vendor. Once lawyers are involved they focus on the existing structure of the company - and that can undermine a valuation.
- Company value - Look around the market and know what similar companies to yours have sold for. Most sellers ask a buyer what they will pay and are given the lowest valuation. Instead, state what the selling price is and give reasons for the calculation. Then negotiations start at the most optimistic valuation and meet on the middle ground.
- Managing a business sale - The sales process is all consuming. Make sure the business can run well while the sales negotiations continue. If the owner is the chief principal revenue earner, it will be hard for the business to survive the negotiations and the subsequent due diligence.
- Never HAVE to sell - Don’t be desperate. Treat the sales process as a game. Do not get emotional. Have contingency plans if the sale falls through.
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