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I'm a stakeholder... get me out of here - full presentation
 

I'm a stakeholder... get me out of here - full presentation

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Looking to sell your business? This presentation maybe just what you're looking for!...

Looking to sell your business? This presentation maybe just what you're looking for!

I'm a stakeholder... get me out of here!

This is the full presentation, which took place on 01.03.11 and Eastwood Park Training & Conference Centre, Falfield, Wotton-Under-Edge (South Gloucestershire).

Speakers included:
- Chris Brill
- Will Abbott
- Peter Mardon
- Stewart Barnes

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    I'm a stakeholder... get me out of here - full presentation I'm a stakeholder... get me out of here - full presentation Presentation Transcript

    • I’m a stakeholder… get me out of here! 1 st March 2011
    • Agenda
      • Talk about my experience of building and selling a Company
      • The factors that I found important
      • Answer any questions
    • In the beginning
      • Start up
      • Survival
      • Growth
        • New challenges
        • Excitement
        • Success
        • Rewards
      • Sale?
    • What Changes?
      • Professional
      • Personal
      • Market opportunity
      • Mixture of above
    • My Own Experience
      • AudioSoft
        • I founded in 1995
        • Grew very rapidly
        • Won D&T award for fastest growing Co in SW in 2000
        • Over expanded
        • Back on growth at 20% per annum
        • Co always profitable
      • Sold to Ultra Electronics in August 2008
        • Met objectives of sale
        • Still with the Company
        • I have a boss!
    • The thought stage
      • Reasons for sale?
        • Approach
        • Co’s growth starting to slow
        • Reached the point of inflexion
        • Consolidation
        • Didn’t want to be working my backside off with a smaller business
      • Summer holiday 2004
        • 5 point plan
        • Covered items like customers, IP, dependency on me, future revenue streams etc
        • Big question – Did I really want to sell?
    • The chew on it stage
      • If I did sell what do I want to do?
        • Lie on a beach dreaming of selling business?
        • New startup?
        • Personal lifestyle issues
      • How would it effect employees?
        • Loyalty
        • Future
      • The deep hard question - Do I really want to sell?
    • Research Stage
      • My own research
        • Various valuations etc
        • Other Companies in similar industries
      • How would I sell the Co?
        • Seminar
        • What effect on my time – I am running the business!
    • Action Stage
      • Worked with Randall & Payne
        • Full audit
        • Advice
        • Knowledge and experience from a trusted source
      • Appointed a Company which specialises in selling Companies
        • Not accountants
        • Not solicitors
        • Not a friend of a friend
        • Sell your Company like you sell your product
    • Action Stage
      • Appointed BCMS summer holiday 2007!
      • Their process
        • 6 months
        • Generation of Information Memorandum
        • 250+ prospective Co’s
        • Letters sent out
        • Meetings
        • Offers
        • Create a market
    • Accountants and Lawyers!
      • Right fit with the business
        • D&T?
      • Why Randall and Payne
        • They know our business.
        • Size & resource
        • Relationship – dealing with a Partner
        • Response – Sat, Sun afternoon, on holiday.
      • Why is this important?
        • It’s a new experience
        • Still running the business – hence likely to be outside normal office hours
    • Legal Advice
      • Two options;
        • BCMS recommendation
        • Accountant recommendation
      • Why Winterbotham Smith Penley (WSP solicitors)?
        • Size
        • Dealing with a Partner
        • Importance to them
        • Close relationship with Randall & Payne
        • Personal previous experience
    • The right team – why it is important
      • Still running the business
        • How many hours are there in the day?
      • New experience for the vendor
        • Acquirer may be doing this all the time
      • One thing I can guarantee
        • There will be problems – Heads of Agreement meeting
      • Reassurance for the buyer
        • Post acquisition comments
        • Our acquirers were very complementary about the team
    • Summary
      • Plan to make the Co fit for sale – timing is vital
      • Sale process – remember you must still run the business
      • Professional advisors – engage early and get a team that is right for you.
      • Valuation – be realistic. There will always be an expectation gap.
      • Keep something on the table for the acquiring Co
    • Selling the Business Will Abbott LLB FCA Partner Randall & Payne LLP
    • Introduction
      • Valuations
      • Tax
      • Strategies
    • Valuations
      • Multiple of future sustainable earnings
      • Asset valuation
      • Discounted future cashflow (minority)
      • Specialist valuations: turnover multiples
    • Valuations
      • Multiple of future sustainable earnings
      • Maximise the multiple (10+?)
      • Always lower than plc
    • Valuations
      • Start with historic profit
      • Adjust for unusual items
        • Director remuneration
        • One off contract
      • Use weighted average
    • Valuations
      • Usually apply 5-8 times
        • 9/10 accountants will do this
      • Often for tax purposes
    • Valuations
      • PCPI average 11.2 times historic profit
      • Mean deal size £20m
      • Median deal size £6m
    • Valuations
      • UK200 SME index P/E 6.8
      • Mean deal size £2.65m
    • Valuations
      • Debt free / cash free basis or Normalised working capital
      • Build up of cash in the balance sheet
      • Valuation plus the cash
    • The New Tax Regime
      • Entrepreneurs’ Relief
        • Lifetime allowance £5m gains at 10% (x2?)
        • Individual allowance
        • Must be claimed
        • Business or part of owned for 12 months
        • Not business property or assets used unless
            • Sold within 3 years of associated disposal &
            • No rent paid
    • Company Shares
      • Trading company
      • 5% of the shares & 5% of voting rights
      • Officer or employee
        • Officer = director or secretary
      • No substantial non trading activities
    • Property
      • ER if owned by Co & shares sold
      • But buyer may not want the property
      • Use of SIPP or SSAS
      • EFRBS
    • Tax Summary
      • Much more restrictive regime
      • Loss of indexation on property assets
      • No reward for long term ownership
      • Less reward for serial entrepreneurs
      • But CGT better than 40%/50% IT
      • Debt free/cash free disposals
    • Strategies
      • Identify what are you selling
        • Customer list
        • Product/service
        • Personnel skills
        • Knowledge/know how
        • Geographic presence
    • Strategies
      • Find a strategic buyer
        • Plc or private equity group - P/e ratios 15+,
        • buying 5-8 times = immediate S/H value
        • Goodwill write off may be an issue
        • Goodwill = price less net asset value
    • Strategies
      • Set up an auction
        • Need 2 and more interested parties
        • Use a selling agent
          • Many Accountants do not have the resources
        • Avoid value buyers and investors – low multiples
    • Strategies
      • Confidence
        • Business is worth what a buyer will pay
        • Confidence in your own business
        • Instil that confidence in them
        • Be prepared to stay on
    • Strategies
      • Start process minimum 3 years ahead
        • Find the right advisors (solicitor/accountant)
        • Get the skeletons out and sorted
        • Legal agreements, employment contracts
        • Audited accounts
        • Spend money to make money
    • Strategies
      • Business plan
        • Future strategy – Business Link: Growth Programme
        • Build a management team
        • Prepare forecasts and meet them
        • Projections; but with buyer’s resources
    • Strategies
      • Due Diligence
        • In house M&A team
        • Too many issues and deal is dead
        • No surprises beyond HoT
    • Strategies
      • Make your own buyer
        • MBO/BIMBO
        • Company purchase of own shares
        • Unlikely to achieve 10+ times
    • I’m a stakeholder… …get me out of here! Peter Mardon Managing Partner Winterbotham Smith Penley LLP
    • Non-disclosure Agreement
      • Confidentiality undertakings
      • Exclusivity (lock out)
      • Costs indemnity
      • Enforceability
      • Limited disclosure
    • Heads of Terms
      • Price
      • Payment terms
      • Deferred Consideration
      • Earn-outs
      • Taxation
      • Ongoing involvement (terms of service agreement/consultancy
      • Net asset adjustment
    • Due Diligence
      • Paper trail (warranties and disclosures)
      • The right impression
      • Employment contracts (especially key employees)
      • Terms of business
      • Agreements with main suppliers/customers
      • Property (lease terms, asbestos reports)
      • Licences, etc. (e.g. Data Protection Act)
    • Share Purchase Agreement (SPA)
      • Operative parts
      • Warranties
      • Indemnities
      • Completion accounts
      • Restrictive covenants
      • The Tax Deed (or tax covenant)
    • What to do Now
      • Service Agreements for you and key staff with restrictive covenants
      • Tax planning, e.g. transferring some shares to your spouse, children, etc.
      • Terms of business and contracts with main suppliers/customers
      • Lease
      • Tidy up statutory books and records at Companies House
    • Stewart Barnes Strategic Development Team Business Link I’m a Stakeholder… … Get me out of here or I want to be a Shareholder… … Let me in there
    • Personal Background
      • Stewart Barnes
        • 10 years with £100m Hansen Group (third generation, privately owned)
        • Overall responsibility for the group with 14 business units in 6 countries employing 1000 people.
        • Business Unit MD at 31, Main Board Director at 34; joint-CEO at 37.
        • Bought businesses in Sweden (2); Denmark, Poland, UK
        • Sold companies in Denmark (MBO, MBI) and UK (MBO)
        • 10 years with Pilkington in sales & marketing management
        • Strategic Development Team assisting regional businesses to grow and develop.
    • Personal Learning
      • Structuring a business to run it is different from structuring a business to sell it
      • Prepare 3 – 5 years in advance to get best value (‘grooming’ though a high - performing business should be doing the following anyway)
        • Grow turnover and profits over the period
        • Sell property and lease it back: sort lease
        • Write a business plan (clarity) and update it annually
        • Hit budgets, forecasts will be more believable
        • Build a management team (it is not about you)
        • Clear roles and responsibilities and contracts of employment
        • Improve processes: ISO 9001, 14001, IIP, EFQM
    • Personal Learning
      • The deal always takes longer than you think (minimum 6 months)…
      • … and you have to run the business as well.
      • Get advice from accountant/auditor - construct the balance sheet
      • Involve your solicitor (specialist)
      • Manage the advisors – do not let them manage you!
      • Understand the terminology – HoTs; SPA; due diligence; warranties; deferred consideration; information memorandum
    • Valuation
      • Be realistic (when you are selling)
      • Can buy businesses very cheaply especially if the target is cash poor or in distress
      • Rules of thumb:
        • Buy at four to five times earnings (PBT)
        • Sell at greater than eight times earnings (PBT)
        • Many aim for seven times earnings (PBT) which is on high side – depending on sector can be between 5.5 to 8.
      • Other indicators:
        • Sales factor can range from 0.4 to 0.6 of total sales
        • EBIT factor can range from 5 to 7
        • EBITDA factor can range from 4.5 to 6.5
    • Opportunity Knocks
      • You may not be planning to sell, someone may come knocking
        • maximise sales value by having a plan rather than a knee jerk sale
      • Management team may be the buyers
        • beware of releasing the Genie from the bottle; minimal warranties
      • Some “cheap” businesses may come available as companies run out of cash
      • “ What do I need to do now to help me?”
    • Business Link Many levels of assistance
      • General Bulletins – Business i
      • Seminars, Events, Workshops
      • Business Advisers
      • Specialist Advisers – Finance, Innovation, Marketing
      • Strategic Development Team
      Call 0845 600 9966 www.businesslink.gov.uk/southwest
    • Any questions?