Written by James Bailey, Partner.
We’ve been covering the key areas to consider when preparing your business for sale. In my first blog on preparing for sale I covered understanding your objectives, starting the process early, company profile / brand and the trajectory of your business.
This second blog on preparing for sale will cover other key considerations:
1. Have the right management team in place
Reducing dependency on the owner or retiring management team will go to value as well as potentially shortening the required handover period post-sale.
If you are selling the business to private equity, there needs to be a clear plan and the right people to continue to run the business and deliver the strategy the PE house is buying into. If you don’t have a CEO in place, then you may be needed to run the business for a period whilst a successor is recruited.
2. Good housekeeping
You need to ensure in the run up to a business sale that you have all your ‘housekeeping’ in order. This can be in areas such as contracts being place for your staff, property, suppliers, customers and company financials.
You need to ensure you have the right quality and depth of financial information in the years running up to the sale. Implementing or improving the effectiveness of management accounting and KPI reporting will go to value as well as assisting in making the due diligence process smoother.
The demand for quality information is crucial in any sale transaction. Some sectors such as technology have detailed and sophisticated requirements around due diligence – having that data prepared and readily available is a great idea.
3. Get to know potential buyers
Understanding exactly who the future buyers of your business could be will undoubtedly help you better to prepare for the sale. You need to think like a buyer to understand why they may buy your business and what their objectives might be. Any process will involve a more detailed review and it’s a fair bet you will not identify the ultimate buyer but the exercise will help in readying yourself.
As much as it’s good to identify your potential buyers and put yourself in their shoes, you don’t want to slavishly match your strategy to just one buyer. They may not become your eventual purchaser so, build a list of companies and CEOs that you think may be interested, and perhaps aim to ‘get on their radar’ in the years before an eventual sale.
4. Business structure and tax planning
Efficient tax planning in advance of a sale clearly makes sense. The earlier you put such planning in place the better.
Restructuring prior to sale might enable you to re-organise the ownership, operational, capital, tax and legal aspects of your company to align your structure to your long-term goals and personal wealth objectives.
Restructuring will take time, so early preparation is key. Restructuring can take many forms and will depend on what you wish to achieve, for example:
- consolidating businesses into a group structure
- share reorganisation
- demerging surplus assets such as property
5. Seek professional advice early
It is never too early to seek the right professional advice. A professional advisor will be able to help you identify potential buyers, ensure there are no ticking time bombs in the business, help you to focus on the areas that will increase value and ensure the sale process goes smoothly.
Here at Springboard, we work with business owners and founders up to 2-3 years before the business is sold. Our work in buying businesses and years of experience selling mean we know exactly what buyers will be looking for and we will advise you on all the options for sale, challenge your thinking and give you straightforward advice.
If you would like advice and help on preparing for sale, then contact us today.