Planning for the sale of a business is essential, however in reality, people often neglect this process.
Being properly prepared (sometimes referred to as “grooming for sale”) is very likely to improve the chances of a successful outcome for owners - both in terms of the likelihood of completion of a deal and an increase in the value achieved.
Some of the areas to consider are:
- PR activity to raise the profile of the business e.g. press releases, business awards, trade press coverage etc.
- Identification of (and potentially cessation of) any non-recurring and non-business expenses incurred. These could include private costs charged to the business, remuneration above normal market levels, family members on the payroll etc.
- Active management of any surplus assets in the business. Management of the working capital position may be more difficult but it is important to ensure that any excess levels of stock and debtors are reduced and that normal levels of credit are taken from suppliers. Such actions will generate “surplus” cash in the business enabling owners to increase the price achieved.
- Reviewing all affairs to ensure everything is up-to-date.
- The impact of owners selling up is reduced if an on-going management team have been fully operational for a period of time prior to sale of the business.
- Assessing the adequacy of financial information and systems. This will ensure that information is available of a suitable standard for potential buyers to review and undertake due diligence on. In addition, accounting policies should be evaluated to ensure that these are reasonable e.g. profit recognition, depreciation and provisioning.
- Contractual documentation should be examined in order that key documents are available for any due diligence process. This could include leases, IP and insurance documentation.
The sooner you start this process the better. Think how a potential purchaser would evaluate the situation and assume that they will undertake due diligence (they undoubtedly will). Be prepared.
CLB Coopers have extensive experience in advising in these areas to ensure that the optimal result is achieved.
To discuss any matters in this article please get in touch with your normal CLB Coopers contact or Steven Lindsay on 0161 245 1000 or slindsay@clbcoopers.co.uk.
