This webinar covered selling a business and maximizing its value. It discussed common reasons for selling like retirement or health issues. Valuation methods were explained like price-earnings multiples. Preparing financially by eliminating debt and non-core activities was advised. Legal and tax due diligence is crucial. The sales process was outlined in three parts from identifying buyers to negotiations. Management buyouts were mentioned as an option. Taxation considerations and typical timescales were also reviewed.
4. Why Sell
Retirement – no succession in the business
Ill health
Release cash – Other priorities
Toughening market
Opportunistic (unexpected offer made)
Consolidation of the business (e.g. non core activity
being sold)
5. Valuation
Definition
The value of a business is the price at which a business will
be sold by a willing purchaser to a willing buyer
Understanding how people value businesses is key
Price Earnings multiple most common
Can use Discounted Cash Flow or Net Assets
6. Preparing your business for sale
Commercial
Maximising Profit / EBITDA
Maximising Multiple
Eliminate non core activities
Legal & Financial due diligence
Tax
Corporation tax
PAYE & National Insurance
VAT
7. Maximising Value: Vendor Actions
Remove risk – deal with legal issues
Customer contracts
Supplier contracts
Tidy up employee issues
Ensure employment contacts in place
Can the business survive without you?
Management team
Intellectual property up to date
8. Maximising Value: Advisor Actions
Market the business for sale
Create competitive tension during sale process
Surplus cash – how to deal with
9. The Process (part 1)
Buyer Research
Prepare Sales Memorandum
Finalise ‘A’ list of potential
acquirers
Prepare a brief summary
of the opportunity
ADDING VALUE
Understanding the target market and value drivers for potential acquirers
Packaging the opportunity
Focussed and targeted approach to potential
acquirers
Ensure potential buyers understand the opportunity
with minimal input
TIME
Approach buyers and sign up
interested parties
Establish a market and test our audience
before compromising confidentiality
10. The Process (part 2)
Despatch Sales memorandum
and control the bid process
Review indicative offers and
shortlist a select number of
bidders to access the date room
Review final offers and
choose preferred bidder.
Enter exclusivity
Assist in the preparation
and delivery of management
presentations
ADDING VALUE
Ensure vendor control to maximise competitive tension
Assist in understanding, evaluating and maximising offers
Select the right buyer
Ensure potential acquirers have sufficient
understanding to present a firm final offer
TIME
Support legal, financial and
commercial negotiations as
necessary to a successful
completion
Drive and control the process to a
successful completion
11. The Process (part 3)
Post Completion
ADDING VALUE
• Assist with post completion matters including:
• Completion accounts
• Earn-out determination
• Taxation issues
• Warranty issues
TIME
12. Identifying Potential Purchasers
• NOT Brokers or Business Transfer Agents
• Direct approaches to decision makers, not scattergun approach
• Own research using professional search tools and software
• Leverage professional network of lawyers, accountants etc.
• Contacts within VC / Private Equity community
• Database of MBI candidate and HNWI’s
• Suggestions from owners
13. Management buy out / in
Potential option if trade sale is not available
Enables you to reward management team for working in the
business to date
Funding is always an area of concern
Potentially look for equity investment for this option
Often sale at a discount compared to trade sale making the latter
more attractive
14. Taxation considerations
Sale of shares or assets?
Entrepreneur’s relief (ER) – 1st
£10 million at 10% rate of
Capital Gains Tax
Qualifying rules for ER
Surplus cash – is it an issue?
Deferred consideration & earnouts
Employment related securities
16. The Documents
Confidential 1 page summary
Information Memorandum
Non Disclosure Agreement / confidentiality agreement
Heads of Terms / Heads of Agreement
Sale Agreement
Warranties
Tax Covenant
Restrictive covenants
17. Why us?
High quality advice available locally
Genuine investment in understanding the business, its key attributes
and the market drivers
Creative solutions
Joined up tax and corporate finance advice
Experience
Commercial input into legal documentation
Highly proactive project management to drive the transaction
through to completion
19. Conclusion
Prepare the business for sale
Plan the process properly
Get the timing right
Be aware of tax issues
Ensure the structure is set up correctly