Getting your business ready for sale

• Think like a buyer

  Thinking through what a potential buyer of your business would be looking for, and taking steps to get those things in shape, or in place, will pay off. At the risk of stating the obvious, what is being sold, and by which company? Are there assets such as property, contracts or intellectual property rights that you would want to retain? Thinking through the perimeter of the sale will also help you to decide if a share sale or a business sale is the way to go.

  The more you can pre-empt, the better position you will be in. You might, for example, need to obtain consents from third parties, transfer assets, or even do a re-organisation before a sale can go ahead.

  Can the business operate without you? A buyer will want to know that they can run and grow the business without its current owner. For example, having a credible management team, and well-established operating systems, is likely to make your business far more attractive to a buyer.

  Being able to have a buyer’s mindset when reviewing your own business may also enhance the value you can achieve on sale, and make the sale process smoother.

  

• Never too soon to plan

  Like dating, first impressions count. The look and feel of a business and its professionalism will be persuasive to a buyer thinking of engaging with you. If you can bake in good business practices and processes now, for example, around your staff, this will not go unmissed.

  Don’t wait for a buyer’s due diligence to expose gaps and risks that can lead to the deal falling through, or you having to accept unfavourable terms to get it over the line. It is never too early to start planning for exit, implementing the right processes and doing the analysis ahead of a sale.

• How is your legal health?

  You can identify and get ahead of issues by running your own mini due diligence exercise, so you don’t have to deal with them in the the heat of the sale process. Key areas to take a look at would be:

  1. Customers and suppliers – are you reliant on any one in particular? Can this risk be mitigated? Have you got robust contracts in place?
  2. People – how does your handbook look? Do you have good, up to date policies and practices?
  3. Premises – for leases, would these be painful for a buyer to exit? Any rent reviews coming up?
  4. Intellectual property rights – are IPR such as confidential information, trademarks and copyright adequately protected? Can ownership be demonstrated?
  5. Compliance – are your regulatory or industry licences and permissions in good shape, and transferable? Can you demonstrate compliance with data privacy requirements?
  6. Disputes – is there anything bubbling away with an employee, or a supplier, perhaps? If so, can you do anything to settle or mitigate this risk?

  All of these things will be stress-tested during the buyer’s due diligence process. Thinking about them at an earlier stage will give you time to sort out any issues, and avoid losing the buyer’s confidence during the sale process.

• Demonstrate financial literacy and best practice

  Poor financial information sends the wrong message to a buyer. Good quality, up to date financials makes a buyer’s ability to value your business, and rely on the financial results, much easier. Showing that you understand your business’s profit trends, future growth opportunities and underlying market dynamics will demonstrate to a buyer that this is the right time to buy, and that the price is fair.

  Managing current and future risks, such as over-reliance on any particular customer, will make your business a safer bet to a buyer. Ensuring compliance with your financial reporting requirements also gives the right impression. Some tax planning ahead of a possible sale may give you a saving on any tax bill post sale.

  See what you can do now to save yourself the stress of trying to deal with it during the sale process.

• Get the right team behind you

  Engaging experienced legal, financial and other specialist advisors in good time will help you to get your business sale ready and to maximise its value. They will also de-stress the transaction for you, and support you in getting it over the line. If you don’t have an adviser team already, start soon and see if you can give them the earliest opportunity to get to know your business, and understand your strategic goals. That way, any necessary actions can be identified and taken well before going to market, ensuring you get the best price. Having these conversations well in advance will greatly improve the chances of a successful transaction.

We have extensive experience on the team with top inhouse lawyers who’ve taken businesses through exits on the sale side, and who’ve acted for buyers as well. As inhouse lawyers, we bring a different mindset to deal-doing, so if you’re planning to exit your business and would like to learn about our approach please feel free to get in touch.