Supporting business sales and acquisitions

Selling a business can be a minefield which will take you outside your comfort zone. Even a seasoned business owner will face decisions and strategies which they don’t encounter day to day.

Valuing a business

The question of sale price is of course key and any valuation should always be overlaid with commercial sense. Stand back and determine where the true value lies, is it in the customer relationships, the technology, know-how, branding or something else?

There are many possible sale and business structures / considerations and long term choices which will crop up, and all the marvellous acronyms which accompany them. From MBOs to MBI’s, BIMBOs to Reverse BIMBO’s, EMI’s, EIS, fund raising, full disposal and part disposal, Freeze Boxes, along with considerations like non-competes, post deal lock-ins, deferred consideration and debt ranking, to name just a few.

Advice and support

I would say this wouldn’t I but, given the above, having the right professional advisors in place is vital. Solid and experienced accountancy and legal advice is what will guide you through the minefield and assist you in making the crucial decisions. You also have someone else to blame when negotiating hard.

Is now the time to sell?

There will always be an excuse as to why now isn’t the right time, a wobbly major customer, high staff turnover or the impact of Brexit, Covid-19, etc. but if you want to sell, it can be achieved. Selling when you don’t have to can be a wise move as it improves your bargaining position.  If you have to sell, your leverage is reduced which will impact the sale price. The skill is in knowing when to sell.

Here are some key points for you to consider:

Start planning in advance - have your systems and teams in place to support the process.

Have your exit mapped out –maximise the value you get and ensure a successful marketing of your business to potential buyers.

Be realistic on timeframes – buyers may want to pay in instalments over a period of time or link the final sale price to the performance of the business in the immediate years after sale.

Expect deal fatigue – deals may drag on leaving all parties frustrated. Lean heavily on your professional advisors for support and to maintain the big picture.

Be ready for Due Diligence – be open and upfront, do not hide things as it will prolong the process. Bring the “housekeeping” up to date, formalising contracts (the longer the term for customer contacts is usually the better), HR matters, health and safety, regulatory issues and other paperwork. Even if the sale falls through, this is time well spent.

Have robust business systems embedded in all aspects of the business. This will not only make the due diligence process easier but provide the buyer and the advisors with comfort over the accuracy and reliability of the information being disclosed.

Finally, keep the business as priority. It’s easy to concentrate on a sale and neglect the day-to-day running of the business itself. Use your advisers to help manage the process so that you can concentrate on that ever-important day job.

For advice if you are looking to sell your business, contact Dale Williams (dale.williams@bpe.co.uk 01242 248234) or another member of the BPE Corporate team.

These notes have been prepared for the purpose of articles only. They should not be regarded as a substitute for taking legal advice.