Every investor, entrepreneur or business owner will at one stage of their business need to consider putting in place an exit strategy with the ultimate goal of selling their business to ensure the best return on their investments. This may include selling the assets of the business, a share sale, merging with another business or transferring the business to the next generation. In any event an appropriate strategy must be put in place to ensure the exit strategy can be carried out as efficiently and most cost effective manner. So while many business owners may consider Âa deal as being doneÂ when the business is ready to be sold, areas you will need to consider include, but are not limited to the following:
Accounting/Tax Advice – It is crucial you take advice so that you fully understand what will work out best for you- asset sale/ purchase or share sale/ purchase. Often accountants and tax advisors can model figures for you to show you the net result for you taking in to account given variables.
Business Agents – They can either be a God send or a nightmare. Do check the terms with them carefully and go by recommendations and not hard-selling agents who attempt to pressure you into signing a contract with them. A good agent can help to market your business well, potentially identify a pool of buyers, as well as making approaches to them and acting as a go between the parties should the deal stall or the parties are unable to agree on a certain point.
BuyersÂ – Do you have a buyer or a pool of buyers? Having a number of potential buyers interested is, of course, ideal because you can create competition between them. You may have a preference with a particular buyer in terms of their strategic fit with your business or the fact that you will have to work with them post completion for a period of time. Once you have a buyer on board you need to plan what is key to you and negotiate on those points.
Confidentiality and Non Disclosure Agreements – Before anything confidential is discussed it is always sensible to put in place an NDA. This will offer you a layer of protection and ensure that confidential matters relating to your business are not discussed openly without restriction. It is also sensible to include post-termination provisions in order to prevent future disclosures.
Due Diligence – This is a fact finding exercise on the part of the buyer. The buyer will undertake due diligence (investigations) on all key aspects of the business so that it can get a better understanding of the business and identify areas of comfort and concern.
Sale/Purchase Agreement – The sale or purchase agreement will set out all the terms of the transaction between the parties. This is usually drafted by the buyer’s solicitor with input from the seller’s solicitor. The agreement is often voluminous concerning lots of areas the buyer and seller have thought of and other areas the lawyers think are prudent to address.
PreparationÂ – Getting all your records in order and start early. Records relating to Tax, NI, Corporation Tax, VAT, Companies House, the Information Commissioner and any other relevant bodies. You may also want to see our article on carrying out background checks prior to beginning the transaction.
PatienceÂ Â Finding the right buyer and selling your business is not a quick process. The seller needs to be patient and must be aware he does not need to accept the first offer he receives.
ValuationÂ – See our article onÂ valuing your business. Is there anything that you can do to increase the value of the business?
Implementing the exit strategy can be strenuous and demanding. The better the preparation the easier the process can be and it is more likely that you will get the maximum return from your business.
If you’re interested in buying or selling a business and would like to find out more, please contact Izaz Ali on firstname.lastname@example.org.