The UK has been a flush with deals in the last few years, with both domestic and international interest increasing as companies compete to snap up the best deals, but JW Hinks Chartered Accountants says businesses could have more success with management accounts.
Despite a number of recent large business sales, the end of 2017 saw a slight dip in UK mergers and acquisitions (M&A) according to Office for National Statistics data.
Estimates for the total value of successful domestic and cross-border mergers and acquisitions involving UK companies during the fourth quarter of the year showed a decline in activity compared to the previous quarter and the same quarter of the previous year (Quarter 4 2016).
In particular, inward investment fell to £35.3 billion in 2017, while domestic M&A fell to £18.6 billion for the whole of 2017 – a decrease on the previous year’s recorded values.
With this decline in sales, Edgbaston-based accountancy firm JW Hinks has said that a clear set of monthly management accounts could prove vital in securing a sale quickly.
A set of management accounts will typically include a summary of balance sheets, cash flow forecasts, and income statements, giving a snapshot of the company’s performance.
Neal Aston, Managing Partner at JW Hinks, said:
“Management accounts are used by a business to highlight areas of high performance and also weakness so that board members and owners can take appropriate action. “However, they can also prove vital in marketing and selling a business, especially where it is not always clear from annual accounts that a business is undergoing a sudden period of growth or success.”
Neal says that in some ways management accounts can be compared to a servicing book in a car sale.
“When you are looking for a car you want something that has a full service history, with all the stamps in the book. Whilst this is no guarantee that the car will be reliable it is a clear indication that it has been well looked after and is less likely to be a lemon,”
said Neal.
“Similarly if you buy a business and you can see that over the last six months cashflow has been good and the balance sheets show a healthy company then you are more likely to buy it.”
While he appreciates that these accounts could also highlight issues within a business, they may then allow a firm to iron out any issues to increase its saleability.
He said:
“Owners must remember that up until a sale is agreed, the business is still theirs and as such, they still have an interest in its success, especially where they are hoping to maximise its value pre-sale.”