Selling your company is something you generally do only once and the reasons for selling will vary.
Perhaps you have decided it’s time to take a well–earned retirement? You might wish to reinvest in a new business; buy a new house or set up your children for their life ahead? Maybe it’s a combination of these?
Whatever you want to do, it’s a rare opportunity to build to sort of life changing capital you can achieve from selling your business. It’s vital that you get it right!
Having helped businesses in this area for the best part of 30 years, I can tell you the process is complex and there is a lot to do. Not to mention certain emotional attachments you may have to make peace with during the process. It’s easy to be overwhelmed by the jargon and frankly if you don’t have your wits about you and someone looking out for your best interest, you could be hood–winked.
The sale will not happen overnight. It’s a lengthy process which can at times feel hard work and testing. Having a trusted partner to help find a buyer, make sure you achieve the best price available, and negotiate a deal that suits you and who in turn carries it through to completion is essential.
“Remember that to finish first you first have to finish”.
Most importantly, you need advisers who are going to keep you in the loop and give the right direction so that until the deal is done you can continue to do your day job, making sure that the company continues to thrives and remains appealing to your buyer.
First Things First
Before you embark on this journey, you need to make sure that the company is in good shape. In particular it needs to be profitable and have recent accounts to show it. You must ensure you are not engaged in any disputes; that key contractual arrangements are in place such as employee and customer contracts and that the business is of a size that will appeal to trade or financial buyers. Another key consideration is to check you have the right shareholder arrangements in place to qualify for Entrepreneurs’ Relief, and finally that all shareholders agree to sell.
The Sale Process
Once started, the process can easily take six months to a year, or even more. Like selling a house, you may have to have more than one go at it if, for example, the price does not come up to expectations, or economic conditions change so that your buyers withdraw.
And, as with a house sale, it helps (metaphorically) to have the coffee brewing and to be making fresh bread when you show buyers around. In your case this will be driving the company profitably and running a tight ship, so that the buyer can see that they will acquire a thriving and growing business, with few distractions from the serious business of growing the company.
Selling-up and calling it a day can be very daunting, not to mention risky. It’s something you should enter into with your eyes wide open and make sure you get the right professional advice and support.
So, how does it work?
The company sale process falls into three stages:
- Marketing the business and identifying suitable buyers
- Obtaining Offers and Negotiating the Deal
- Driving the sale to completion.
Let’s explore how we at FPN approach each of these individually.
Marketing the Business
- The process kicks off by preparing an Information Memorandum, which describes your business and sets out detailed financial and other relevant information. We use this to prepare an anonymised one page “flyer” which is intended to whet the appetite of buyers.
- You know best who’s who in your market. So, we will always speak to you to tease out who is growing, who is consolidating the market and who is not worth considering (or who you don’t want to consider because of confidentiality or other sensitivities).
There are probably more buyers out there, and it’s our job to search them out and do the leg work. There may for example, be buyers who are not (yet) in your line of business but have customers in common with you. There may also be overseas competitors who want to get into the UK market, making your company an attractive proposition.
Lastly there may be financial buyers, such as private equity houses for deals of a certain size. We can help unlock those with our experience, contacts and knowledge of the market.
Obtaining offers and negotiation of the Deal
- Once we have identified the interested parties, the fun really starts and moving them from making noises of interest into a structure process can be a bit like herding cats!
- Initially, we introduce them to the management team and arrange a site visit. In other words, we let them see the operation and ‘smell the brewing coffee’.
- Next we obtain indicative offers with proof of funding and make comparisons ready to present you with your options.
- We help you to select your preferred bidders and negotiate their offers so that you can be sure that you have achieved the best offer available in the current market, and that the other terms of the deal (payment timing and conditions, earn-outs, retention of exiting shareholders to hand over the business etc) are what you want.
- We then translate the offer into heads of terms, which is a (largely) non–binding document setting out the principal terms of the deal for the guidance of the lawyers, to inform any further negotiation and agree that with the purchaser.
Driving the sale to completion.
- The heads of terms document is signed by both parties, and activates the legal process, in which the legally binding contract is negotiated with the purchaser’s solicitors.
Now the purchaser is likely to start their due diligence. This is a process in which the purchaser’s advisers will request detailed legal, accounting, tax, commercial and technical information. We are very often asked to help deal with the questions and work closely with you, your lawyers and accountants, to come up with commercial strategies where the enquiry can’t be answered directly.
This is the point when the real engagement starts. Both sides commit to legal and other professional fees, and so start for the first time to have a significant financial interest in the completion of the deal.
- The intensity of the process also increases. There are a lot of decisions to be taken. Some trivial, some potentially deal threatening. This means time, a lot of thinking and close attention.
This is the time when:
- The detail gets ‘hammered out’
- The price finally starts to crystallise
- The method for arriving at the completion accounts is settled
- The warranties required by the purchasers are negotiated and appropriate disclosures made to limit your exposure.
Soon enough the contract will have been negotiated, the bank mandates will be changed, arrangements will be made to resign as Director(s) and to sign the share transfer forms, and most importantly the funds will be transferred to your solicitor’s client account.
At this point you will sign and your new life will begin!
The Right Adviser
At FPN Ltd we believe it’s essential that those your instruct as Advisers, have an Accountancy background, so that they can prepare a meaningful set of marketing documentation for the sale, and so that they understand the commercial and accounting issues that will unquestionably arise throughout the process. It’s important to remember that the price will be driven by the numbers, so you need to have someone who can more than adequately crunch the numbers, at your side, plus:
- Your chosen adviser should be a clever marketer, who has a good knowledge of your sector and the imagination and wit to understand why and how your company may be a strategic fit with another. This requires understanding, experience, imagination and persistence.
- They must be a good negotiator and able to represent your company in the best possible light. This requires experience and the ability to be able to intuitively read the situation. Ideally, they will have done these many times before.
- And they need to be able to understand the issues as they arise. Not just in their detailed legal sense but in terms of what that means for you, and for the deal, and what can be done to resolve them, or circumvent them. Again, experience and hard–won knowledge are key here.
- Finally, you are going to spend a lot of time with your advisers, so you need to like them and trust their judgement and input throughout the process, so that when you need to you feel you can lean on them, knowing they will be there for you.
How we can help?
FPN is a firm of Chartered Accountants, and both principals have MBA’s.
We have been selling businesses for thirty years, including one of own, so we have seen and experienced the process from both sides. This makes us unique, as does our personal approach.
Whilst larger firms often split aspects of the sales process across multiple individuals in multiple departments, with FPN you get one, highly experienced point of contact who will work with you directly throughout the entire process. This means you can rest assured that the process will be handled as swiftly and smoothly as possible, with consistent, informative and timely communication throughout.
Over the years we have honed and fine-tuned a very successful approach to identifying appropriate buyers, securing sales for all size and scale of business, across a variety of industries, some of which have been very niche.
Having been in the business of “selling businesses” for so long, naturally we have established a solid and well–respected reputation in our field, not to mention an extensive network of professional and business contacts which gives us an edge as we seek buyers and secure your deal.
We’re here to demystify the process and help you all the way through, so that you come out of the other side of your sale with a healthy chunk of capital, your future planned and peace of mind.
If you would like to know more and/or would like to explore our services further, then get in touch and let’s book in an informal meeting. Call on 02380 381956 or mail us at firstname.lastname@example.org. First meetings are totally free of charge and without obligation.