Selling a business, or indeed a partial sell-down, is an important process that should not be taken lightly. Ensuring that you have the right team behind you providing the correct financial and tax advice and the benefit of their expertise is imperative. We have the experience, track record and expertise that you need for a successful properly structured sale of your company.
Being properly prepared can dramatically increase the odds of you getting the best deal, and price, for your business. Preparing to sell your business should not just start when you put the business on the market. Planning ahead and grooming the business for sale can lead to an improved sale price.
A business valuation is an art, not a science. We would advise that when disposing of a business an asking price is not disclosed. However, clearly a business owner needs to understand whether their expectations are achievable before embarking on a sales process.
We initially provide a valuation by reference to the maintainable earnings and net assets of the business itself, not including within the valuation any potential synergies that prospective purchasers may provide.
There are certain sectors and circumstances that mean a net assets basis of valuation is more appropriate. This approach uses the business' net assets from its latest balance sheet. Adjustments are then made for any assets or liabilities that are not included at an open market commercial value, e.g. revaluation of any freehold property. A final adjustment is then made for the value of the goodwill which typically is not included in its accounts.
Having assessed the value of the business from both the earnings and net assets perspective we can then provide the vendors with a sensible starting position for valuation from which they can evaluate any offers received.
This is the critical work undertaken during the period prior to selling a business when the owner puts in place the key requirements to get the business in the right shape to generate the best possible price.
In practice, personal circumstances may restrict the time available for this process and consequently what is ultimately achievable will be determined by the time available.
In essence, the approach for selling a company is similar to that of selling a house; if your exit timescale is one year or less you will have a quick turn around. If you have up to five years to prepare, internal structural alterations such as new bathroom or kitchen can be considered. If you have five years or more you may build an extension.
In business terms with a year or less available you will highlight and deal with the immediate issues that otherwise could be deal-breakers such as tax issues or realising the value of any surplus assets. You should always appoint advisors as early as possible when a business sale is being considered.
With up to five years available a vendor can carefully plan the exit, all successful businesses have well prepared strategic plans. There are numerous areas that should be reviewed such as building and incentivising a strong management team capable of running the business, managing working capital requirements and hence maximising the availability of surplus cash.
Care needs to be exercised to ensure you are operating within the right business and tax structure and only undertake those activities which are going to increase business value.
With an exit horizon beyond five years, the business should plan for growth. A holistic exercise should be undertaken where the business owner assesses the value they want to achieve. We advise and assist clients to develop a strategic plan embracing new products, new markets and potential acquisitions. We may even assist the process by obtaining an independent view of the business from an industry expert drawn from our wealth of contacts.
This is absolutely critical to the process of selling a company. Our approach to searching for the buyer uses various different methods including specialist databases and professional networks, to compile a list agreed with the vendor of who should be approached.
Often vendors know the market better than anyone and are able to identify likely acquirers amongst the current competitors, customers, suppliers, etc.
Having prepared a quality Information Memorandum all of the above will then be approached on a confidential basis.
Market forces will normally prevail and the maximum price is usually achieved through a competitive bidding process.
This approach allied to the previous work undertaken in developing the optimum working capital cycle and realisation of surplus assets, will maximise the overall value received by the vendor.
Having reached Heads of Terms, typically prepared between ourselves and your lawyer, we will help you with the legal process.
This will include responding to the due diligence enquiries in relation to your accounts, tax returns and legal questionnaire which will cover all aspects of your business.
We will assist in advising and negotiating the warranties and any indemnities that are included in the sale and purchase agreement.
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