Selling your business in Kenya: why preparation starts two years before the sale

For most business owners, selling the company is the largest financial transaction of their lives. Yet many approach it the way they would sell a car: wait until they are ready to leave, find a buyer, agree a price. In practice, the value a buyer will pay, and whether the deal closes at all, is shaped by decisions made long before anyone signs a confidentiality agreement.

Whether you are planning a full exit, selling a stake to a strategic partner, or bringing in a buyer to fund the next stage of growth, the same principle applies: the better prepared the business, the stronger your position.

1. Understand what drives value

Buyers pay for future earnings they believe are reliable. Anything that makes those earnings look less reliable lowers the price, or moves part of it into conditions and deferred payments.

The factors that most often reduce value in mid-sized Kenyan businesses are familiar ones: heavy reliance on the founder for customers or key decisions, a small number of customers making up most of the revenue, informal contracts with important suppliers or customers, and accounts that mix personal and business spending. Each one is fixable, but most take a year or more to fix convincingly.

2. Clean up the numbers early

A buyer will want to see a clear, consistent financial track record, usually at least three years of audited accounts that agree with your management accounts and tax returns.

Owners often run personal costs through the business, or keep some revenue and costs off the books. Whatever the history, a buyer will only pay for profits they can verify. Two or three years of clean, audited accounts showing the true profitability of the business is one of the most valuable things you can build before a sale.

3. Make the business less dependent on you

If the business cannot run without you, a buyer is really buying a job for you, not a company. Start building a management team that can run day-to-day operations, document your key processes, and introduce your senior people to major customers. Buyers will pay more for a business that clearly survives the founder's departure, and they will ask for shorter and less restrictive handover periods.

4. Get a realistic view of value

Owners and buyers often start far apart on price. An owner sees years of effort and future potential. A buyer sees risk, and what they would need to invest after the deal.

An independent valuation, done before you go to market, closes much of that gap. It tells you what the business is likely to be worth today, what is holding the value down, and what you could change to improve it. It also gives you a defensible basis for negotiation when offers arrive.

5. Prepare for due diligence

Once a buyer is seriously interested, they will examine the business in detail: finances, tax, legal structure, contracts, employees, licences and any disputes. Problems found at this stage are expensive, because they give the buyer a reason to cut the price or walk away at the moment you have the least room to negotiate.

Running your own review first, sometimes called vendor due diligence, lets you find and fix those problems on your own timetable. It also lets you present a well-organised data room, which shortens the process and builds the buyer's confidence.

6. Plan for regulatory approval and tax

Depending on the size of the businesses involved, a sale may need approval from the Competition Authority of Kenya before it can be completed, and some cross-border deals also fall under the COMESA competition regime. Completing a notifiable deal without approval can lead to significant penalties, so check early whether your transaction is caught and build the review period into your timetable.

Tax matters too. Capital gains tax in Kenya has applied at 15% on the net gain from selling unlisted shares since January 2023, and the rules continue to change. How the deal is structured, including whether the buyer acquires shares or assets, can make a significant difference to what you keep. Take tax advice on the structure before you agree terms, not after.

7. Run a competitive process

The single biggest driver of a good outcome is usually competition. A business offered to one buyer is negotiated on that buyer's terms. A business presented to several qualified buyers, through a managed process with clear stages and deadlines, puts the seller in control of timing, price and terms.

That process also has to be confidential. Word that a business is for sale can unsettle employees, customers and suppliers. A structured approach, using a short anonymous teaser and confidentiality agreements before any detail is shared, protects the business while the sale is under way.

Where an adviser helps

An M&A adviser works on your side of the table. We help you understand what your business is worth and how to improve that, prepare it for due diligence, identify and approach the right buyers, and manage negotiations through to signing and completion, so that you can keep running the business throughout.

If a sale, merger or partial exit is something you are considering in the next few years, now is the time to start preparing. Our team is glad to talk through your options in confidence.

This article is general information only. It is not financial, legal or tax advice, and you should take advice on your own circumstances before acting.