This is a guest post from Ena Hunter, Solicitor at Barlow Robbins.
Selling a business is likely to be the largest and most important financial deal any business owner will ever make and it usually pays to start planning a sale well in advance.
This gives you time to groom the business – fixing any issues which could dramatically affect its value and making it as attractive as possible to potential buyers and will allow you to maximise your financial rewards.
Planning in advance will highlight any issues which might have an impact on a sale.
For example, you should ensure that:
-equipment is well maintained;
-key contracts are in order – this should include reviewing customer, supplier and agency agreements and formalising any commercial relationships which are otherwise on an informal basis;
-there is no outstanding litigation or unresolved matters;
-you are complying with all legislation and regulations including health and safety, data protection. pension and employment law;
-you have clear ownership of any intellectual property rights – intellectual property can be one of the most valuable assets of a business and therefore it is important to protect it;
-your finances and accounts are in good order;
-the property arrangements for the business premises are in order;
-you review the share structure and group structure if relevant and ensure that both are both commercially and tax efficient;
-all company statutory books and records are fully written up and properly maintained and minutes of all directors’ and shareholders’ meetings are adequately recorded and filed;
-you review the current Memorandum and Articles of Association in case you need to exercise any drag/tag rights on a share sale.
The more confidence a buyer has in your business, the more attractive your business will become and the higher the price they are likely to offer.
What do buyers want to know?
Once you have identified potential buyers it is helpful to understand what they will want to know in order to buy your business.
The buyer will want to consider:
-the financial performance of the company (what it is and what it could be);
-what makes the business unique and valuable (the strength in the brand/goodwill);
-are there any risks for the business which could effect its future viability (is there any outstanding litigation?);
-is the business prepared for a transition to new ownership (will the sellers need to stay on?).
Some final tips:
-Know your market – this will give you a clear idea of which companies would want to buy your business.
-Ensure your business processes and records are in good shape.
-Resolve any potential shareholder issues – it is important that your shareholders are aligned to your sales approach and are willing to support you. Shareholder disputes can frequently delay a sales process and ultimately prevent a sale.
-Be ready for the due diligence process – a buyer will undertake due diligence prior to committing to any purchase and this exercise can be lengthy.
Make sure you have a non-disclosure agreement in place to protect your confidential information before providing a buyer with information relating to the business and start getting important information together as early as possible.
A significant number of business sales fail due to lack of pre-sale planning.
For further advice on the ways in which a seller is able to maximise their returns on a sale, please contact the Corporate & Commercial team at Barlow Robbins LLP.
