If you are actively in the market to sell your business, or considering a sale in the future, it is important to get your business affairs in order. The typical objective of business owners when selling their business is to maximize the total value received upon the sale of their business. Addressing the five considerations below will assist you in presenting an attractive target for prospective buyers.
Assemble your team
Having the right advisors from the outset will ensure you are organized and prepared for potential buyers to scrutinize your business. These advisors include accountants, lawyers, valuators, brokers, financial advisors, banker, brokers, and key executives and employees within the business. A kickoff meeting to introduce the team and outline your goals ensures everyone understands your intent and the process to achieve your goals. If the sale process has already started, it is important you reach out to your key advisors as soon as possible so that any deal is structured appropriately at the earliest stages to reduce any costly amendments and the risk that the deal will fall apart at the later stages.
Get your books in order
A potential buyer will likely want to review your financial statements, and if conducting a share sale, your corporate minute book. It is important that these are up to date and accurately reflect the current state of your business. Any agreement of purchase and sale will likely include representations and warranties regarding the accuracy of the financial statements and the validity of corporate actions. Presenting well organized and clean financial statements and a minute book will reflect positively on your business. Further, your credit facilities should be reviewed for any bank covenants that may impact your ability to sell. It may assist the sale of your business to restructure your debt to ensure assets may be sold or credit facilities may be paid off and discharged or transferred to a buyer.
Put it in writing
Written contracts with key suppliers and customers should be prepared. Further, license agreements, permits and leases should be reviewed to ensure they are up to date. Agreements with key employees should be reviewed and terms extended to ensure they may be retained by a potential buyer.
Manage your risk
You should review your business operations to ensure compliance with applicable regulations and laws, including employer obligations, health and safety regulations, environmental regulations, and industry specific requirements. Your advisors can assist you in assessing business risk and liability and identify risk mitigation strategies to limit those risks. While all risks may never be fully eliminated, adequate insurance should be obtained to protect against loss and damage, including losses from business interruptions and from unexpected death or disability.
Prepare for the market
With your business continuing to generate consistent cash flows, and your affairs in order, it is time to take your business to market. You should consider whether a public marketing effort would discourage customers or undermine key suppliers, in which case a private marketing approach may be preferred. Your advisors can assist you with privately marketing your business, coordinating the receipt of offers, assisting with negotiations, drafting agreements, and preparing for and supervising the closing of the transaction.
With these considerations in mind, your business will be well positioned to invite offers from prospective buyers.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.