Preparing to sell a business?

Many businesses are marketed for sale without having been properly prepared for the rigours of buyer scrutiny in a sale process.

Running a sale process for a business that has not been properly prepared can be disastrous for shareholders; either the business fails to sell and shareholder value can be destroyed by market awareness of a failed sale process, or the value achieved will fall far short of the value that could have been achieved by properly preparing the business for sale in advance.

Ensuring a good result requires thorough preparation! Having extensive experience in selling businesses, Shield understands precisely what actions can and should be taken in advance of running a sale process in order to maximise value for shareholders and ensure a smooth sale process.

What needs to be done to prepare my business well for sale?

Optimising a business for sale has many aspects. You need someone to look at all of your business functions objectively, adopting the point of view of potential investors and/or acquirers.

Key questions buyers are likely to ask, and questions you need to be ready to answer, include the following:

What are the risks in the business? Key dependencies (Key person, key customer & key supplier)? Adequacy of contractual and intellectual property protection? Sustainability of revenue streams? Certainty of revenue growth? Regulatory compliance? Potential for litigation?	What is for sale? Share capital or assets? If there is a sale of part, how separable is the business and what are the risks of separation? Will the transfer of undertakings (Protection of Employment) Regulations need to be considered? Is the corporate structure optimised for favourable tax treatment to shareholders? In the event of an asset sale, can key contracts be transferred to buyer?
How will the business perform? What are the projected revenue and profits for the business? How credible are the projections in light of the history? Where does the growth in the business lie? Is the business in a growing or declining market? What is the business’s current and projected market share? How does the business plan to achieve its projected growth? How much investment does the business need?	What do shareholders want? Value? Will the shareholders consider an earn-out? Do the shareholders want to retain some equity? Will the shareholders sign employment contracts? If the shareholders leave, who will replace their roles in the business? What are the shareholders alternatives?

What are the risks in the business?

Key dependencies (Key person, key customer & key supplier)?
Adequacy of contractual and intellectual property protection?
Sustainability of revenue streams?
Certainty of revenue growth?
Regulatory compliance?
Potential for litigation?

What is for sale?

Share capital or assets?
If there is a sale of part, how separable is the business and what are the risks of separation?
Will the transfer of undertakings (Protection of Employment) Regulations need to be considered?
Is the corporate structure optimised for favourable tax treatment to shareholders?
In the event of an asset sale, can key contracts be transferred to buyer?

How will the business perform?

What are the projected revenue and profits for the business?
How credible are the projections in light of the history?
Where does the growth in the business lie?
Is the business in a growing or declining market?
What is the business’s current and projected market share?
How does the business plan to achieve its projected growth?
How much investment does the business need?

What do shareholders want?

Value?
Will the shareholders consider an earn-out?
Do the shareholders want to retain some equity?
Will the shareholders sign employment contracts?
If the shareholders leave, who will replace their roles in the business?
What are the shareholders alternatives?

Aside from the questions you are likely to face from potential investors/acquirers, there are many pertinent questions to do with whether or not the business is prepared for the sale process itself, such as:

Is it the right time to sell (if not, then when)?
Does the business have a clear and accurately stated financial history?
Are there any exceptional and/or non-recurring costs that could be added back to historical profits?
Is the business prepared for due diligence?
Are key people in the business incentivised to see a transaction through to completion?

All of these questions need to be addressed in advance of sale in order to ensure that the business is sold and for the highest possible price. Where there are weak answers or indeed no answers at all, you need to take action to address them because otherwise the consequences could be disastrous.

Why choose Shield to help prepare my business for sale?

Shareholders often underestimate the level of scrutiny that their business will be subjected to by buyers. And they can’t always foresee the types of questions and potential concerns that buyers are likely to have.

Shield’s experienced advisors are able to help prospective sellers prepare for sale for the following reasons:

They have faced the sorts of questions buyers ask many times over, so they are well placed to anticipate them
They can look at businesses objectively and see potential weaknesses and problems that sellers are often too subjective to see themselves
They are experienced business advisors who can help you take the required remedial steps which make a difference to the business and its sale value
They work closely with clients to get under the skin of the business, to understand it more thoroughly than most advisors are prepared to do
Unlike most advisors who are purely focused on the success fee they get when a business is sold, Shield has a genuine interest in getting the best value for its clients, even if that means dispensing some “tough-love” advice

What are the fees?

The fees Shield charges for this service depend on what needs to be done in the business in advance of sale. The first phase will be a diagnosis of the business which will cost £5,000, and the second phase will involve advising on and implementing improvements, liaising with other advisors such as lawyers and accountants if applicable.

What Next?

If you are considering selling a business now or in the future and would like to learn more about what can be done in advance to maximise value then call us now for a no-obligation discussion with one of our advisors.