The Corporate Finance Team look at Selling Your Business. Starting with your initial decision to sell, four articles will cover:
- Choosing advisers, valuation and finding a buyer.
- Exclusive bidders, due diligence and structuring the deal.
- Sale agreement, warranties/indemnities and disclosure letters.
- Handover, investment reliefs and alternatives to golf.
This may seem an odd place to start. After all most business owners will already be clients of legal and accountancy firms. However, the advisers who help you with your annual audit, tax returns etc. may not be the best choice for a business sale. Ask their advice, and you may find that they recommend others for the transaction. Most professional firms recognise their limitations, and are prepared to strengthen their relationship with you by recommending specialist advice when required. If they say that they are equipped to act in a business sale, don't be reluctant to ask for details of relevant experience. A true expert is proud of his CV.
If fresh advisers are being sought, it is important that the personalities "feel" right for you. A sale can be a very intense experience and it adds an extra tension if you dislike the person with whom you are dealing.
An important first question from any adviser is 'Why do you want to sell?' An outright sale might not be your only succession and pension option. A good adviser will discuss your overall objectives with you. Its better to be sure at the outset that you want to sell rather than having a sleepless night on the eve of completion.
The million dollar (hopefully!) question. How much can you hope to get?
Although the private company sale market can be monitored and measured (some would say seven times earnings after tax is the current aim in the Scottish market) the bottom line is:
- You know your own market better than most.
- You know your competitors and likely interested purchasers better than most.
- A "true" value is nothing more scientific than the price someone is willing to pay.
- Supply and demand always has an impact on prices. Lots of similar businesses up for sale at the same time will deflate prices.
- A purchaser with particular strategic objectives for whom your business is important will probably pay more.
- Your personal objectives, whether retirement or succession, may well be more important than trying to time a sale to catch the highest possible market price.
How To Find A Buyer
The short answer is, think like an estate agent.
With the help of your advisers (to ensure that the selling exercise doesn't destroy your business by giving away confidential information):
- Define the four or five unique/key selling points (USP's) of your business.
- Prepare an attractive sales brochure explaining these points.
- Approach likely interested parties armed with your USP's.
- Mailshot target parties. Many advisers have a database of sector contacts and intermediaries who may have interested clients. Advertise in the Financial Times, Regional Newspaper or, best of all, your particular industry's Trade Press.
- Think about your management team and employees as potential purchasers.
Hopefully this exercise will produce a short list of keen purchasers.
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.