1. Presentation to Access to Finance
Advisors
Companies- Valuation, Grooming For
Sale and Selling?
Robert Williams BA (ECON) ACA MBA EWI CF
19 January 2017

2. Presentation Content
Introduction
 Background & profile
Valuation
 Methodology
 Other considerations
Grooming For Sale
Sales Process
Case Studies
Summary and Questions

3. Introduction
Background & profile
Robert Williams BA (ECON) ACA MBA EWI CF
 Chartered Accountant – Pedigree : BDO, International Accountancy here and in Australia
 25+ years in Corporate Finance, doing deals and advising on Deal Structures
 Deal value : £200K to £300M
 Independent 16 years, corporate strategic advisor as well as transactional deal doer
 Experienced in both UK/ overseas deals (Europe new and old, USA, Australia)
 CF qualification accredited
 Taught on final pre exam course for ICAEW CF qualification
 Williams & Co Corporate Finance and Funding For Business Network Limited (FFBN) are a
team of 7 people working across UK
 Chairman and Non Executive director roles for SMEs (Turnover of £60 m or less)

4. What do we do?
 Not brokers but professional advisors
 Buying and Selling Companies and MBOs and MBIs
 Raising Funding be it equity VC or business angels, any form of debt
and also property development funding and property deals
 Very “Hands on” Corporate Turnaround / Rescue rather than
Corporate Insolvency, typically running companies with the owners
 Valuing Companies, shares and partnerships- real transactions/
Matrimonial and other litigation cases
 Expert Witness Institute EWI

5. What is a Company worth?
Methodology
 Very complicated subject but by definition subjective
 What somebody will pay for it !!
1. Price Earnings based valuation- stock markets
2. Asset valuation
3. Dividends basis
4. Discounted Cash Flow etc
 Subjective definitions and variables.
 Worth at least break up value? Redundancy, leases etc

6. What is a Company worth?
Other considerations
 Depends upon purchaser’s:
 Plans for the business
 Financing structure & funder’s requirements
 Perception of risk & payback period
 Based upon projected returns
 How reliable are the assumptions?
 Prospects of growth in the business & sector
 Timing is key
 Earn Out or performance related, deferred payment terms
 Owner (s) staying on?
 Physical asset base
 Unique attributes (IPR, contracts, barriers to entry) and differentiation.

7. Grooming a business for sale
 Analogy with a selling a house
 How messy?
 Timing?
 Building value- Positioning for sale
 Accounting V Sell of business presentational conflict
 Sustainable profit enhancement P/E ratio

8. Sales Process
 Similar to selling a house, just much more complicated
 Overview background – timing, tax, grooming, types of buyer
 Fee structure, paid, success fee, hybrid
 Valuation
 Sales prospectus/ Information Memorandum
 Confidentiality letters
 Identifying targets depends on client preferences and sector – lots alternatives
 Meetings/ discussions
 Heads of terms multiple bidders (next slide)
 Formal Due diligence -commercial, financial and legal
 Negotiating the deal (another slide)
 Managing the people and process
 Completion !!

9. Heads of Terms
 Outline main aspects of deal
 What is being purchased
 Indicative offer price & conditions
 Structure e.g. deferred element/earn outs
 Pre and/or post due diligence
 Exclusivity
 Owner staying on/ consultancy fees?
 Subject to contract and due diligence
 Comfort on ability to finance

10. Negotiating the Deal
 Continual process from Heads of Terms stage to
completion
 Deal breakers – walk away or materially change
structure
 Price issues – quantify effect of issues, wait for a
number of issues before returning to ‘table’
 Give and take
 In parallel with due diligence

11. Taxation?Taxation?
Summary Assets V Share dealsSummary Assets V Share deals
Asset & trade dealAsset & trade deal
 Generally better optionGenerally better option
for purchasersfor purchasers
Share dealShare deal
 Generally better option forGenerally better option for
vendorsvendors
Can often use price negotiation to account for the
fact that one type of deal is better for one of the
parties than the other

12. Selling a business case study 1
 Manufacturing company in North of EnglandManufacturing company in North of England
 Deal size £3+ millionDeal size £3+ million
 Entrepreneurial business serial entrepreneurEntrepreneurial business serial entrepreneur
 ValuationValuation
 Concern re trade buyerConcern re trade buyer
 Possible MBO; Seeking MBI so investors and funders involved.Possible MBO; Seeking MBI so investors and funders involved.
 Actual MBI/MBOActual MBI/MBO
 Change in circumstances and Heads of Terms (8 versions!)Change in circumstances and Heads of Terms (8 versions!)
 Deal structure: Short handover period; Consideration-Deal structure: Short handover period; Consideration-
deferred and short term earn out; 3 yrs’ non-competedeferred and short term earn out; 3 yrs’ non-compete
clauses.clauses.
 Over a year to Complete.Over a year to Complete.

13. Selling a business case study 2
 Niche specialist service business in North of England withNiche specialist service business in North of England with
sister related off shore companysister related off shore company
 FCA regulated so lots of regulatory complications and delaysFCA regulated so lots of regulatory complications and delays
 Deal size £2.5+ millionDeal size £2.5+ million
 Retirement saleRetirement sale
 Professional Management team also were the vendorsProfessional Management team also were the vendors
 No ability to do MBONo ability to do MBO
 Lots of trade bidders several internationalLots of trade bidders several international
 Change in circumstances and Heads of Terms changedChange in circumstances and Heads of Terms changed
 Deal structure: Long handover period; Consideration (3Deal structure: Long handover period; Consideration (3
parts)-Upfront and some deferred with extra on earn out; 3parts)-Upfront and some deferred with extra on earn out; 3
yrs’ non-compete clauses.yrs’ non-compete clauses.

14. Summary- Key Takeaways
 Take stock of company – current and future prospects.
 Valuation
 Time consuming and complex process requiring time, financial cost and emotional
commitment
 Relationship and chemistry with Corporate Finance and legal advisors important as life
changing one off transaction often determining size of pension pot ! Out of hours
access
 Risk to business of providing third parties with information and consequences of
aborted deal
 Give serious consideration to developing an exit strategy (Grooming) before starting
the process
 6 to 12 months process not unusual
 Check the suitability of the advisors. Few have this expertise & the client may be
paying to educate them!!
QUESTIONS