One of the biggest decisions that you will need to make early on in the sale process is who to appoint as your advisors. These will include financial advisors, lawyers and tax specialists.
Appointing appropriate advisors can ensure a much smoother sale transaction and achieving the desired exit price.
The financial advisor is key to ensuring a successful outcome.
Their role will be to:
· Review the Company’s financial and business information;
· Advise on strategic options and process to adopt;
· Advise on the indicative value of the business;
· Advise on how best to maximise the sale price;
· Advise on the timing of the sale;
· Ensure that the selling document (Information Memorandum) is professional and enticing to a purchaser;
· Advise on all key financial, business and market information that should be included in the Information Memorandum;
· Identify and approach a wide range of potential purchasers;
· Provide a guide on the key points that should be considered when making an offer;
· Ensure proper preparation prior to meeting purchasers and then lead the negotiations;
· Obtain indicative offers for the Company and advise appropriately – researching the quality of the bidders and ensuring that the deal is structured in the most beneficial way to the seller;
· Advise on tax consequences – a vital service which many company sales advisors are not able to offer their clients;
· Prepare Heads of Terms – many advisors leave this to the lawyers, which is normally a more costly route;
· Co-ordinate the due diligence and legal work;
· Take the client past the winning post to completion.
Whilst it may be tempting to try and save on costs and not appoint a financial advisor, this would be likely to be detrimental to the final desired outcome – which is to maximise the sale proceeds on a gross and on a net (after tax) basis.
Specifically they can provide:
· Assessment of different businesses and financials and offer appropriate advice;
· Wide market knowledge with the ability to trawl for purchasers;
· Many years experience of dealing and negotiating with purchasers;
· The ability to make confidential approaches on your behalf on a no-names basis;
· A tough negotiating stance – protecting the ‘warm relationship’ between buyer and seller, who may decide to work together post-sale during an ‘earn-out’ period
· The right advice on the commercial and tax issues of the deal structure.
Financial advisors can come in a number of different forms:
· Investment Banks – tend to focus on the big deals
· Large accountancy firms – these can offer a broad package including taxation, accounting services and vendor due diligence
· Specialist M&A firms. These tend to fall into two categories:
i) The ‘brokers’, who usually take a very limited marketing approach and who put businesses up for sale at an ‘asking price’ – a starting point from where negotiations will likely only go down.
ii) Specialist M&A professionals. Our friends at Shaw and Co – the award winning corporate finance experts, who offer advisory services to UK SMEs on funding, buying and selling businesses – are a great example of this.
Tips for choosing a financial advisor
There are a number of things to keep in mind when making the all-important financial advisory appointment:
· Make sure that you are important to the advisor
· Carry out a ‘beauty parade’ of two or three advisors
· Gain confidence from verifiable previous transactions
· Meet the whole team that will be looking after you and make sure you feel comfortable with them
· Ensure that their valuation is ambitious but most importantly, realistic and achievable.
· Do not be pressured into an immediate sale
· Understand the fee structure but keep in mind that achieving maximum value for the sale and post-tax proceeds are the main factors to consider.
The other advisors
A good lawyer with commercial experience can add significant value to a transaction and you should consider at an early stage whether your existing legal advisor has the right skills.
Points to bear in mind are:
· Does the firm have specialist M&A experience?
· Are the resources and breadth of expertise adequate for your transaction?
· Does the firm have adequate indemnity cover for your size of transaction?
· Conduct a beauty parade of two or three firms – feel comfortable that you will be able to create a strong personal relationship with this key advisor
· Ensure that you get a fee estimate up-front.
Your business, and the auditors files, will almost certainly be subject to due diligence so the key question to ask is “would the auditors’ files pass the test?”
Even if there are some reservations over this question, many owners are tempted to use their existing accountants and auditors because of the relationship and the knowledge they have built on the business, perhaps over a number of years. However, the key consideration should always be to appoint advisors who will be able to do the best to maximise the value of the sale.
A vital aspect of the deal value is not just the purchase price achieved but the net amount that the seller gets to keep after paying taxes on the proceeds.
Depending upon the company’s circumstances, you may need other advisors such as IFA’s (are all matters such as directors’ and staff pensions satisfactory and up to date?), property advisors (are your current advisors properly equipped to deal with matters arising from a sale?) and so on.
The sale process can be quite stressful, so it is important to ensure at an early stage that you have the right team of advisors, both old and new, to support you from start to finish.
What it means for the business
Selling your business can be a lonely, busy and stressful time. Having the appropriate senior management team in place can help ensure that not only does a sale process happen more efficiently, but also that your business doesn’t suffer as a result.
If your management team is capable of running the business on a day-to-day basis this will free up your time to ensure that the sale process runs as smoothly as possible.
Artemis Clarke helps business owners find finance directors that have the experience to support them. Not just to help them survive, but to help them thrive – whatever their business goals.
Speak to us about how the right financial help could make a difference to your business. Call 0117 244 1891 today.
If you are considering selling your business and would like to contact Shaw and Co to book an initial discovery meeting, call them on 0330 127 0100 or visit www.shawcorporatefinance.com.