Advice from Irish Entrepreneurs on Selling a Business: Karen Malone - Centaur Fund Services
Three entrepreneurs reflected on their own business journeys to share the inside track and key learnings from selling their business: Karen Malone (FCCA), Global CEO and Co-Founder of Centaur Fund Services, James McGann, Co-Founder at Frankie Health, Denise Browne, Co-Founder at Label Craft.
Here is Karen Malone’s advice:
Karen Malone set up Centaur, a global financial services fund administration business, with two other founders in 2009. Karen and the Centaur team had two transactions, one in 2019 with FTV Capital and another in 2022 in their transaction to become part of the Waystone Group.
A turning point in the business was in 2016 when one of our large clients wanted to move all their business to us and wanted security that we wouldn’t sell. They took a relatively small stake in the company and we did that deal ourselves.
When it came to 2019 we were flying high, we had expanded into new jurisdictions and we were attracting larger clients. We continued to fund our growth out of our P&L - which is hard to do - so we thought it was time to take in some capital.
We went to the market to get RFPs (requests for proposals). We were skeptical about what an advisor was going to tell us about balance sheets, P&L and forecasts, because we’re accountants and that’s what we do for a living, but we were blown away by Key Capital’s presentation.
Somebody told me a long time ago, you don't just wake up and decide to sell your business tomorrow. You're always dressing the business, always getting it ready
You’re going to have to prepare and the first step for us was to go to market. We had a specific target of investor that we wanted. We wanted somebody who didn't want to manage our business. That's what we do, we're the operators, we wanted somebody who was going to help us either get into new jurisdictions or bigger clients and help us grow our business. Yes, they take a stake and share in the upside, but we wanted help to institutionalise our business.
Thankfully we had the advisors and the team we had, because you're essentially 'double jobbing'
On the sales process, you just couldn't do it on your own, it’s like a full time job and you still have to run the business. You haven’t got your team helping (because they’re focused on running the business) so there’s really only a couple of people trying to run the process, much like a war cabinet. You're running a business during the day and the process during the night, weekends and during any spare time.
You have lots of advisors who keep supporting you, advising and helping you through the process, whereas the team we got (from Key Capital) actually did most of that for us. They were fielding queries from potential buyers, helping us prepare for interviews to sell our business. It's not just about the buyer’s price and what they're willing to pay, it's actually about their behavior and what they want in a company, so that's how you analyse your business as what the buyer is willing to pay for.
In 2022 we got approached by trade buyers and it was a very different deal. It was a far more strategic deal and the Key Capital team did very different things for us
The acquirer had a business that also operated in the financial services sector, but they didn't do what we did, so this proposition was appealing to us as they were not looking to integrate all our processes. Being approached was very different to going to market ourselves. This time it was more around how to get the right price, how to structure the deal correctly and how to make sure we got what we wanted by selling our business 100%.
You can take money from anybody but what was critical for us was finding the right investor
Some of the questions we had for the potential acquirer were: 'How are you going to help us bring in better clients, drive revenue even faster and harder, and help us further institutionalise our business?’
You have to ask and make sure everybody's aligned. It's too late to find out when you're sold
When we picked Key Capital, they stood out from other people because they actually listened to what we wanted. They asked were the three founders all aligned? They didn’t want to bring us around the world and go to fantastic meetings in New York and London and one of us is not aligned. That goes back to the guidance and the adviser piece, it's not just the spreadsheets and the assets.
Being in a partnership or in a family-run business with more than one decision maker is obviously great because you can share the load and the risks. We were probably fortunate enough in that we would constantly have the topic on the agenda so any time we got a new opportunity we always looked at what made sense: would we do it organically or would we actually go and do some sort of an acquisition.
How do you keep staff motivated during a protracted period over a sales process?
We signed the deal on 17 March 2022, but due the complex regulation across global jurisdictions the deal didn’t close until 13 January 2023. One of concerns was how to keep staff engaged over a protracted period. We were a very small privately owned business at the start, now we have hundreds of staff in different locations that were helping us sell this business so we opened up the cap table and we allowed senior people come in and buy our shares essentially.
We also opened up an ESOP, (an Employee Share Option Program) which was a very unusual to do, but we gave everybody a piece of equity. It didn't matter what level you were, you just had to be with us for over six months or past probation, so by the time we told them about the sale everybody was on board. They're all still with us today and our clients are still with us.
I won’t lie, it was 14 years of blood, sweat and tears, but it was a lovely way to have the whole team across the world get paid when the deal closed and we did that all on the same weekend; everybody got paid when we got paid. We felt happy that we had done something for everybody and ourselves. And then you turn up to work on Monday as usual because we had a job to do. Today, a lot of our staff actually feel they have more opportunities now because they're part of a bigger business.
"I won’t lie, it was 14 years of blood, sweat and tears, but it was a lovely way to have the whole team across the world get paid when the deal closed."
Karen Malone, Global CEO and Co-Founder of Centaur Fund Services.
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