By Clive Hyman, Hyman Capital Services
When it's time to sell your business, you want to be sure you'll get the best price – one that rewards you for the hard work you have put in.
To generate the best offers for your business – from the right buyer at the right price – you need to be aware of the following:
1. Business as usual
Keep to business as usual – looking after your clients' needs must not be interrupted. If it is, then the business you are selling will not hold its original / potential value.
2. Define what you are selling
If you are splitting a business to sell only a portion, work out the costs associated with the part that is being sold. Put in place costs for required external services (for example, those the company may currently source internally, but will no longer be able to do so after the split and sale). These budgeted costs need to hold up to third party scrutiny and must be in-line with current market prices.
3. Price expectations
Listed companies need to look at the listed market valuations and sales. Private companies should look at the sale prices from the last two to three years to form a benchmark price for your company type, scale and size.
Consider engaging an external adviser with better knowledge and access to this information.
Keep the confidentiality of an intended sale and only give information to managers and staff on a need-to-know basis. This will help maintain the status quo and ensure that the day-to-day running, output and achievements of the business are not disturbed.
Identify shareholders' and other "one off" expenses that may have been charged to the profit and loss account. These figures may need to be added back to the P&L to establish the recurring profitability of the business. Buyers like to see consistent trends. Therefore a sale may need to be managed over two to three years.
6. Due diligence
Get external legal and accounting companies to do due diligence on your own company. The genius of this is that it highlights issues that you may not have been aware of so that you can manage them in advance.
Understand the impact of any sale on your tax position; corporate and/or personal. It may be possible to shape the consideration to minimize legitimately the tax payable.
8. Warranties and Indemnities
You must be able to truthfully say that the information you are giving to the purchaser has been prepared on a proper basis and gives a true and fair view of the business you are selling.
Be aware that if certain items come to light a purchaser may be entitled to make a warranty claim. The sale and purchase agreement will therefore need a procedure to deal with this.
9. Project Management
There is a huge amount of information that needs to be prepared – and this can eat into a lot of time. Create a project team and manager to assemble all the data and information that the advisers will require. This will make the deal process more efficient and identify any issues that need to be worked on.
10. Information Memorandum
An information memorandum will need to be prepared. Instruct an external party to do this as they will be able to present the information in a way that is acceptable to potential acquirers. This may take six to eight weeks to prepare.
11. Completion Arrangements
Ensure you fully understand the "completion statements". These deal with the cash and other assets and lay-out what happens when the sale is completed. Check that everything is in good order on completion.
Finally, to achieve the maximum value from your exit, remember that the two games – running the business and running the sale – will need to be played simultaneously and successfully through to the very end.
About the Author
Clive Hyman FCA is founder of Hyman Capital Services offering expertise in due diligence and managing change in business including raising equity and debt capital, mergers and acquisitions, interim management, board management and governance, deal structuring, and company turnaround. See: www.hymancapital.com