The sale process
For most owners, selling their business is something they have never done before and are unlikely to do again. It can be easy to underestimate the potential disruption to the business in management time or the length of time that the sale may take.
From our experience, it will typically take some time between 7 – 9 months to complete a company sale deal.
Here are the key points you’ll go through in the sale process:
The decision to sell
For most entrepreneurs this can be a very emotional, and stressful, decision. Knowing that they may only get one chance to sell their business and potentially a lifetime’s worth of hard work, it’s of course essential to get it right.
Whether you are considering a sale for a change of lifestyle or because it’s the right time in your business’ life cycle, one of the key issues is timing. We can help provide clarity, by assessing the health of your business, providing a current valuation and a realistic idea of what you might be able to achieve in the future, if the timing isn’t quite right now.
Maximising the potential value prior to marketing your business
‘Grooming’ your business for its eventual sale is key to obtaining the best price and should start as early as possible. As you approach a sale it’s imperative to consider all of the key factors – from minimising extraneous expenditure to the timing of lease renewals.
Appointing the right advisers
Before marketing begins you will need to appoint Solicitors and Accountants. However, the financial adviser plays the key role. Many owners are tempted into taking a DIY approach but this is one of the main reasons most company sales don’t go ahead or never reach their full potential. Selling a company requires a blend of marketing, financial, legal, negotiation and specialist tax expertise in order to maximise the value in the sale. Appointing an experienced advisor is crucial, so check out our guide (linked to ‘Appointing advisorsyou’re your sale) on the criteria to assess the right one.
Attracting buyers
The Information Memorandum is key to attracting the right prospective buyers. Your Financial Advisor should prepare a carefully constructed document, which will effectively market your business in the first instance. It should contain information about the company’s activities and trading history, geographical location, the appointed advisers, sales figures, financial history and future growth potential, amongst other things. The art, however, is to create an exciting document about the future, enticing a number of keen purchasers with the potential benefits.
Targeting potential purchasers
This involves a lot of hard work, an active and imaginative approach and lateral thinking. You may have to ‘kiss a lot of frogs’ before you find the right buyer but that is why good financial advice is essential. A good advisor will not only scour the pond but separate the frogs from the toads! The marketing process needs to be actively and vigorously pursued in order to identify as many serious buyers as possible. A good Financial Advisor will typically undertake a multi-pronged marketing approach – utilising extensive business databases, industry contacts and discreet and confidential advertising in the appropriate channels.
Hooking potential buyers
The first meeting with Potential Purchasers is crucial to the success of the sale. Careful preparation is needed to excite the buyer about the acquisition. The right advisor will take the time to understand your business inside out so they can make all the difference in the initial meetings with interested buyers.
Creating competition for your business
It is essential to engage with enough serious purchasers to create a competitive bidding situation by the time they are ready to make indicative offers. It is at this stage that the structure of the deal and the substance of the bidder have to be given careful consideration in order to maximise the sale price.
Preferred bidder status
Once indicative offers have been considered then the sale process moves to preferred bidder status. You may prefer one bidder to the others but until the deal is done it is crucial to keep one or two others “warm”.
Agreeing the terms of the deal
The Heads of Terms is a document which, whilst non-binding and subject to contract, sets out in principle the main terms, conditions and timing of the deal. The purchaser’s solicitor often prepares this, however, as part of our service in looking after our client’s interests, we often prepare this document ourselves.
Due diligence by the buyer
A due diligence audit will be carried out to satisfy the buyer on various matters – ranging from the validity of the financial information to commercial, environmental and legal matters. Your Financial Advisor will be the main point of contact at this important stage, liaising with your accountant and solicitor as necessary.
The legal contract
The legal documentation is generally initiated by the buyer’s solicitors and sets out in much more detail the items covered in the Heads of Terms.
Deal completion
At the end of the sale journey, comes the exchange and completion – when the corks pop and Champagne is opened following a successful deal!
If you would like to learn more about how we can help you through the whole company sale process, please call Malcolm Coomber on 020 8652 2450 to arrange a free, no obligation meeting or email mec@clarksonhyde.com.