Preparing your company for sale
Selling your business is your opportunity to reap the rewards from many years of commitment and hard work. However, the process of selling your business can be overwhelming. The stress of dealing with the sale process (and resolving any issues that arise) on top of the existing commitment of running a business can drain even the most motivated businessperson. Building an experienced and grounded sale team helps, but preparing your company for sale can further streamline the process making it easier for you and making your company more marketable to a potential buyer.
Structuring a sale
Understanding what sale structures are possible will allow you to make more informed decisions when negotiating the sale of your business. If considered before the sale process begins, it also gives you the opportunity to identify the sale assets and adjust your structure accordingly (for simplicity or clarity). This in turn will help speed up the sale process when it begins.
It would also be sensible to undertake a review of your company’s articles of association and any shareholders agreement in place to see if any restrictions on sale that need to be considered when choosing a structure for sale.
Due Diligence – getting your house in order
A buyer will undertake due diligence of your company as part of the sale process. Often this will uncover issues which will then need to be resolved before the sale can proceed. Doing some basic due diligence in advance allows you to understand the potential issues that may arise and fix those with less time pressures.
Part of this due diligence process will be financial due diligence. Having clear, accurate and up to date financial records not only helps you to understand the value of your business but also simplifies that process. You may also wish to obtain a professional valuation for your business from an industry specialist before engaging with potential buyers.
It is possible that much of the value of your business is tied up in the knowledge and experience of key employees. As such, it is essential to ensure that the employment contracts of key team members are in order.
In addition you should identify any intellectual property needed to run your business and check that any registrations necessary to protect that intellectual property are up to date.
A potential buyer will want to review all your formal contracts, especially for key clients, to understand the standard terms and conditions under which you contract (which may be either your terms or your clients). In particular, any potential buyer will be looking out for clauses that require you to obtain client consent before a sale can proceed. Banking documents are also likely to contain clauses requiring consent or restrictions, and loans may need to be repaid at completion of the sale.
Any property owned or leased could be a key asset in a sale and will likely significantly impact the valuation of the business. If you will be selling any property it is important to ensure that you can show a clear line of title. If your business holds any leases over property these need to be in order.
Please get in touch with a member of our corporate team if you would like to discuss preparation for a selling your business.