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Day 1 – Selling a Business

IT DIGITAL CREATIVE

Day 1 – Selling a Business

CORPORATE FINANCE

Welcome to another in our series of five day blog articles. This week we are looking at the best steps to take when selling your business.

In the first day of our series, our Corporate Finance team look at the importance of pre-sale planning.

Business owners consider selling their companies for a variety of reasons, both personal and strategic, with retirement often the main driving factor.

For the majority of business owners, selling a business is the culmination of years of work and can be a difficult, sometimes emotional and time consuming task. A sale is usually a once in a lifetime event so it is important to undertake pre-sale planning. Think about the possible sale of your business several years before you intend to start the process, as good planning will help you maximise the value.

Pre-sale planning defines a tailored exit plan which should have three key objectives: to maximise your sale value, to ensure that the business is attractive to the widest possible range of purchasers and to give the sale process the best chance of completing.

A thorough pre-sale planning exercise should seek to assess:

Potential purchasers:

  • Who would be interested in buying the business?

How can the business be less risky to potential purchasers?

  • Does your business have management in place that can run things in your absence? If not, you need to consider the length and type of handover you are prepared to give.
  • Can informal deals with suppliers and customers be formalised?
  • Could incentive schemes encourage key employees to remain with the business?
  • Does the business have undue dependence on a few large customers or a single source of supply?

Valuation:

  • How will the business be valued? Valuing a business is more of an art than a science. In the absence of taking a business to market, shareholders should get professional advice on the best valuation method for their business.
  • How can the business be made more valuable from a buyer’s perspective?

Clean up your financials:

  • Does the company have robust financial systems in place for timely and accurate management information? Having clean financial statements will simplify the transaction and add value to your business.
  • Are financial forecasts routinely prepared and success measured against forecast? Each prospective purchaser will want to see detailed historical financial information, including accounts and an indication of future forecasts. Establishing a robust system of financial forecasting and comparison actual against budget results builds up a historic record of achieving set milestones.

Tax planning:

  • If Shareholders are entitled to Entrepreneurs Relief.
  • Ensure tax compliance.

Select the right team:

  • The first task in presale planning is to assemble your team of advisors. They will advise you in all phases of the sales process, from presale planning through post-closing.


For further advice in regards to planning the sale of your business, please contact a member of our Corporate Finance team.

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