Questions to ask your proposed adviser

Questions to ask before appointing an adviser to sell your company

You will understandably have a myriad of questions to ask us about undertaking such an enormous decision – questions which include how much a proposed adviser’s fees will cost before signing up to use their services – and how the deal will be structured.

The questions below are designed to enhance your understanding on the proposed adviser’s approach to your sale and their track record.

The purchaser of your business will conduct due diligence on your company. We urge you to also carry out your own due diligence on your proposed adviser. The sale of your company is likely to be the biggest financial transaction of your career – and it’s vital that you appoint the most experienced adviser to achieve the very best outcome for you.

Question 1

What do you think my company is worth?

Ask the proposed adviser this question – and ask them to explain how they have arrived at that figure.

Ask for this information to be confirmed in writing prior to their appointment.

Some brokers give very high valuations which are unachievable, using the valuation as a sales technique, in the belief that the broker giving the highest valuation will win the assignment.

We recommend that you be very sceptical about high valuations.

Our experienced and transparent team at Strategic Corporate Finance will not “lead you up the garden path” with an unachievable valuation – we tell it as it is.

Question 2

Can you advise on the best exit option?

Many business owners assume that a trade sale is their best exit option.

A top class adviser will explore all your options with you – which may include selling to your management team to arrive at the best exit route.

Many company owners and their management teams often misunderstand the mechanics of a management buyout (“MBO”) – and how it can be funded.

This can be the preferred option where business owners wish to ensure that the company, in which they have invested so much of their lives, will continue to run in its existing form after they retire.

An MBO can secure the future of their staff, reward a loyal management team – and sustain the longevity of brand and its equity. Understanding at an early stage how an MBO might work, and how it would be funded, can help you consider whether this is a viable option.

Most brokers are unable to advise on whether a management buyout is a viable option, because they lack experience of MBOs and will often be fairly dismissive of them because their fee is only secured if you opt for the trade sale route.

Our extensive experience of trade sales is complemented by our wealth of expertise in management buyouts – making us ideally placed to advise on which route is best for you.

Our management buyout website gives specialist advice, information and guidance on how to carry out a management buyout including raising the finance for an MBO.

Question 3

How do you identify prospective buyers?

We conduct in-depth research to identify potential buyers for your business. This is in stark contrast to brokers who are more likely to adopt an advertising based or mass marketing based approach because they lack access to the subscription databases required for a targeted approach.

Some advisers will claim to have a list of known buyers. Whilst we also possess such a list, our experience tells us that our subscription databases are much more powerful tools in identifying potential purchasers, including international buyers.

Question 4

Does your marketing strategy always involve international buyers?

Our extensive experience indicates that international buyers often pay the highest prices. For most businesses we are selling we actively search out both global and UK buyers.

Unless your company is unlikely to hold any interest for overseas’ buyers, ensure your appointed adviser is experienced in researching and identifying international purchasers and dealing with cross border transactions.

Question 5

How would you approach the marketing of my company?

Effective and focused marketing of your business is essential to achieve the best results.

Ask if the adviser will be proactive and approach potential buyers. If so, who will deal with the approaches – and will administrative staff or professional employees make the all important first impressions?

Find out if the adviser operates reactively by waiting for prospective buyers to respond to their advertising of your business. If this is the case, again check who will take the phone calls – administrative or professional staff?

Direct approaches to potential purchasers should be made directly by an adviser with the skills and experience to clearly explain the acquisition opportunity and its relevance and interest to that prospective purchaser.

This important discussion will almost always be with a board director or member of the senior management team. This discussion constitutes a critical first step in forging a relationship with a prospective buyer, understanding their motives and the strategic thinking of their organisation – and ultimately encouraging them to submit their best offer.

Some brokers delegate contacting the list of potential purchasers to administrative staff. Making initial contact with buyers is most definitely not an administrative task and requires the skills and commercial acumen of qualified, experienced and professional advisers.

Question 6

What is your success rate?

You may be familiar with brokers’ marketing literature and website slogans boasting: “highest success rate”, “achieve maximum value” and “get the best price”. But how many of the businesses they sign up do they successfully sell? The answer will give you a sound indication if the adviser is the one for you.

Our track record speaks for itself: we have sold virtually every business we have ever taken on as a client.

A supplementary question worth asking is: “Of those you sell, what proportion are sold for at least the valuation you initially placed on the business?”

Our success rate is achieved through our proactive research based approach and through ensuring our clients have realistic valuation expectations prior to appointing us. We will only accept an appointment to act when we believe that a client’s valuation aspirations are achievable.

Question 7

What is the typical size of your clients?

Find out how many businesses they have sold in the last 2 years with a turnover similar to your own.

This information is key to learning more about the size and complexity of their typical assignments and will help you to judge whether they are likely to have the skills necessary to successfully complete your company sale.

Question 8

If I appoint you, will you have time and resource to deal with my sale?

It is vital that you ask prospective advisers – in particular the individual adviser who would lead your transaction – how many deals both they and their firm is working on.

The response will indicate the level of personal service and attention you will receive from your appointed adviser. It will also reveal how much time they will invest in finding the best buyer for your business, encouraging the best offers and seeking out solutions to any commercial or financial issues which crop up prior to completion.

Our approach recognises that all businesses have their individual complexities and issues which need to be taken into account when they are sold. This is why we tailor it for each client – we do not deliver a standard “conveyor belt” process. Our experienced and skilled team only take on a select number of transactions at any one time – investing hundreds of hours of professional time in each assignment.

Question 9

How long have you been operating?

Another crucial question to ask – because anyone with no qualifications and no experience can set up a business claiming to be a specialist in company sales.

Ensure the adviser you appoint has a successful track record and find out how long they have been trading.

Question 10

Who will be involved in my transaction?

Ask for the names, job titles, qualifications and experience of everyone who will be involved in the assignment. You need to understand what each of these people will be responsible for.

Further information on why is it important to commission experienced individuals to support your company sale throughout the whole process.

The last thing you need – or deserve – is your transaction being used as a training exercise for new or junior staff.

If your proposed adviser is an accountancy practice, establish whether all the staff who are going to be involved on your company sale work full-time in corporate finance. You may find that some of them usually work in the accounts production department or audit department – only helping out on deals when the corporate finance department is busy.

Every Strategic Corporate Finance assignment is managed by our team of professionally qualified and highly experienced advisers – we do not employ junior or unqualified staff.

Question 11

Do you support the deal between Heads of Terms and legal completion?

Ask the adviser for a detailed explanation about their level of involvement after Heads of Terms* have been agreed – and exactly what they will do.

Many brokers see their role as largely completed once a purchaser has been found who has made an acceptable offer.

However, much work and expertise is required to turn an acceptable offer into a completed transaction. At this stage our team at Strategic Corporate Finance acts as lead deal advisers responsible for managing the transaction.

Working closely with your lawyers, we interface with the preferred purchaser and their advisers in managing all the detail that needs to be negotiated to complete the transaction as well as striving to resolve issues arising out of the due diligence and legal process.

*Heads of Terms: By Heads of Terms we mean the outline or principle terms of any proposed acquisition which have been agreed between the parties to the transaction, where the agreement between the parties at this stage in the sales process is still subject to contract, due diligence and also sometimes finance raising.

Question 12

Can you give me a list of references?

Ask for a list of former clients and of professionals they have delivered transactions for who would be happy to speak to you about their service.

Although clients will usually undergo a transaction once in their lifetime, other professionals (particularly lawyers) will have worked with many different corporate finance advisers / brokers and will be familiar with the standard and quality of the work of individual who will lead your deal. Try and avoid taking written references – you will glean a greater insight by phoning and discussing.