By Ollie Newbold

Ollie Newbold

 

In my article; ‘Are you ready for Exit?’, I discussed the typical factors that can influence the value of your business.  Once you have tackled these issues there are some further considerations to be made:

Recognise When the Time is Right – Even if the business is in good shape, are you emotionally prepared for the sale of the business?  After years of dealing with the highs and lows associated with business ownership you need to make sure you are fully committed to the exit process and prepared for life beyond.

State Your Objectives – Make clear any ‘deal-breakers’ or objectives that would fulfil your sale requirements and write them down.  These will be useful for making decisions during the shortlisting process and assessing whether buyers have respected these points.  Things to consider are buyer culture, handover periods and offer structure.  For example, if you are family business, you may prefer to sell to another family business to maintain the established family feel of the business.

Be Realistic on Value – Your valuation report will give you a clear indication of the value of your company but the true test of value is dictated by the market and what a willing buyer is prepared to pay for it.

Be Transparent – By being as open and honest as possible, we can prepare to navigate any anticipated tricky issues that may arise as part of the sale process.  If we do identify any issues, we can try and address these before the sale in order to avoid a potential price-chipping opportunity for the buyer.

Set Time Aside – Dealing with the sale of a company is a significant drain on management time.  Setting time aside will reduce the strain on both you and your business and keep you focused on the objective.

 

Dry Run Due Diligence Assignment

The key to a smooth transaction is maintaining momentum to ensure that all parties are working efficiently and effectively to adhere to the set deadlines.  One of the main factors that can slow this process is waiting for responses to information requests from professional advisors.  These requests typically arise as part of the buyer’s Due Diligence assignment.

We suggest trying a dry run Due Diligence process, like we do in our Practice, as a pre-sale exercise which endeavours to answer all the foreseen questions in advance.  Using a comprehensive Due Diligence questionnaire, you can gather as much information as you can relating to identify any areas of weakness and actions that need to be taken.

Both accounting and tax issues can arise from the dry-run Due Diligence process however, legal issues such as shortfalls in employment information, lack of policies, expired registrations and data protection issues are all typical areas in which questions may surface.  As such, we would encourage an early engagement with a lawyer in order to identify and address any legal issues that may arise, particularly as they may take longer to resolve.

Once the dry run Due Diligence process has been completed, you can rest assured that, whilst every question may not have been anticipated, most queries can be resolved quickly, allowing the transaction to move forward unimpeded and giving the purchaser comfort in the underlying controls and systems of the company.

Data Room

All of the documentation gathered during the process should be  uploaded to a secure online data room and organised into folders which correspond with each element of the Due Diligence Questionnaire. The information gathered is essentially a bible of all the key information a buyer needs to make a full assessment of the business.  The information is retained in the data room which is opened up to shortlisted purchasers at a later date.

Benefits of Detailed Preparation

  • Highlights any problems ahead of the buyer’s due diligence process allowing us to address it in advance;
  • Allows for a smoother and quicker sale process;
  • There is less pressure to gather information quickly. You can take your time and make sure the information gathered is relevant and complete;
  • You accountant and lawyer are able to review and gain a greater level of detail earlier and are, therefore, able to deal with the issues that arise more easily;
  • The data room population process can be used to confidently provide any relevant disclosures against warranties.

If you would like help preparing your business for sale please contact Ollie Newbold, Head of Corporate Finance, on 01242 776000 , email oliver.newbold@randall-payne.co.uk or visit www.randall-payne.co.uk.

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