How long does it take to sell a business?
It can take 6 to 9 months from the point when you appoint a corporate finance adviser to legal completion when you receive your funds. Occasionally it can take longer.
What will buyers look for in my business?
Different buyers will be looking for different things, depending on their strategic plans. The fact that they are considering an acquisition at all is because they have decided this is the best way to achieve their strategic plans, by buying an existing business rather than starting from scratch and building an operation up organically.
A good corporate finance adviser will be able to give insight into the factors driving previous acquisitions of companies like yours and this might help to identify what a strategic buyer in your sector is typically looking for, such as additional market share, geographic expansion or new products and services.
Whatever the specific factors relating to a particular industry, there are some features common to all businesses which a buyer will look for.
Do you put a sales price on the business?
We generally advise against putting a sale price on a business when it is being marketed for sale.
Different buyers will place a different value on your business, depending on what they plan to do with it, how it combines with their existing business and how far it helps them to achieve their own strategic plans.
For this reason it is advisable not to put a “price” on your business, but to encourage potential strategic buyers to consider how much your business is worth to them and to put forward a competitive offer.
The best offers will always be submitted when potential buyers know they are in a competitive bidding situation with other potential buyers.
The best way of ensuring that you receive the best offers from the most promising strategic buyers is to commission a corporate finance adviser to sell your business. A good corporate finance adviser will use methodical and detailed research to identify the best potential buyers, will approach them directly in a professional manner, and will maintain a dialogue with them to understand how your business fits in with their strategic plans so as to encourage their best offer.
I’ve had an approach for my business. What should I do now?
I’m worried about my employees / customers / suppliers finding out, how can I keep it all confidential?
Keeping everything confidential is usually a key concern to most business owners we work with. Maintaining confidentiality is important to us.
Uncertainty about the future ownership of the business among staff, customers and suppliers can be unsettling and damaging to a business.
We suggest as few staff as possible are made aware that a sale is in process, and that staff are only told on a need to know basis, for example to assist with pulling together detailed information required to show to prospective buyers.
A good corporate finance adviser will insist that all prospective buyers sign confidentiality agreements prior to releasing detailed information.
It is always good practice to pre-empt a leak of information and have a prepared response ready in case a member of staff or customer asks whether the company is being sold.
I want to transfer my business to members of my family, can you help?
In recent years we have acted for a number of clients who have transferred ownership of their business to other family members through a management buyout.
Our management buyout website gives specialist advice, information and guidance on how to carry out a management buyout (“MBO”) including raising the finance for an MBO.
What documents will I be asked to sign up to when finalising the sale my company?
The Heads of Terms summarise the key commercial points of the proposed transaction. They can help avoid misunderstandings and identify any misconceptions right at the start of the deal. The Heads of Terms are usually not legally binding, other than confidentiality clauses and exclusivity clauses. An exclusivity clause (or “lock out”) gives the purchaser time to complete the transaction during which the vendors are “locked out” from selling to (or even talking to) any other potential buyers.
The Share Purchase Agreement (“SPA”) is often between 40 and 100 pages long. As well as covering the commercial terms of the transaction, it will include many pages of Warranties and a Tax Indemnity. The Warranties are a list of legal undertakings that the vendor will provide to the buyer at completion. There are usually so many warranties that they will be listed in a separate schedule to the agreement. Warranties are assurances by the vendors to the purchaser that specific facts or conditions are true. Warranties often include assurances regarding accountancy, company secretarial, employee, customer, taxation, property and environmental matters.
The Disclosure Letter is the seller’s opportunity to cleanse their soul once and for all about anything they know about that contradicts one of the warranties. The principle that governs this document is that if a matter is disclosed then the purchaser cannot make a warranty claim against the vendors in respect of the matter disclosed. The buyer has an opportunity to consider the matter, to investigate further and to assess the likely risk should they choose to do so. If the matter is not disclosed when the seller knew about it (or ought to have known about it) and it subsequently gives rise to a loss then the buyer may be able to make a warranty claim, seeking repayment of part or all of the purchase price paid for the company.
Do I have to pay for due diligence reports?
It is usually the buyer or a business, or the bank providing the buyer with the funds for the acquisition, who commissions and pays for a due diligence report. If a buyer does commission due diligence, you will have to accommodate the requests for information and answer queries.
Can you advise me on how to invest my sale proceeds?
Strategic Corporate Finance do not offer wealth management or investment advice, although we would be happy to introduce you to our contacts who have the appropriate qualifications and experience.