When you sell a company a close partnership between the outgoing management and their appointed professional representatives is vital.
In order to assist you in making sure that the business is ready to stand the close scrutiny of potential purchasers we will need to ask a number of key questions at the outset:
What are the reasons for selling the business?
It may be that the current owner(s) are retiring or moving abroad. The business may have grown to the point where the current management simply can not take it any further.
The capital investment required in taking the business to the next stage may be prohibitive. There may be personal or family reasons driving the sale.
Whatever the reasons, they need to be credible and capable of being communicated to buyers during the early stages of the sale process.
Can the business function effectively without the direct involvement of the current management?
If the business is totally owner dependent potential purchasers will recognise this very quickly. This will be an important factor for both trade and private purchasers. They will factor the cost of replacing the current management into their value judgement.
The level of training and ongoing support you are able to give your purchasers may also be a key consideration.
What is the preferred exit route of the existing owners?
Most of our clients prefer an outright sale. In certain situations the purchasers will want to make it a condition of sale that the current management remain in place for a period of time and will attempt to defer and link the total consideration to performance (the ‘earn out’ model).
It will often be possible for us to negotiate a higher price in these ‘earn out’ situations as the buyers are seeking to limit their potential downside.
We need to establish our client’s preference from the outset as this will have a bearing on how we market the business and negotiate the sale.
At this point the outgoing owners will need to think about the tax implications of their exit. Advice will need to be sought from the company accountant or a tax expert.
We will need to understand at the outset the preferred structure of the transaction as this will impact on the way the business is presented to prospective purchasers.
Is the financial information in order and up-to-date?
We will need to review all current and historical financial information. This is a vital part of the valuation process.
Once we have established genuine interest from a qualified prospect and obtained an undertaking of confidentiality they will expect to be provided with an Information Memorandum and this document will contain relevant financial data.
How does the business look from an outside perspective?
First impressions are lasting impressions is a well-worn phrase. We will undertake an initial assessment and, if necessary, give practical advice in terms of what might need to be done to ensure a good first impression.
Our suggestions may range from a redecoration of the reception area to investment in new technology or equipment.