16 finance
Are you maximising the sale potential of your business?
If you’re thinking about selling a business, there are plenty of things you can do to maximise the appeal of the company to potential buyers – and the key is to start planning early. Paul Stout, corporate finance associate director in Grant Thornton’s Southampton office, offers some tips below on avoiding potential threats to your sale
Selling a business can be long and difficult.
In today’s market of ever-
increasing complexity and competition, there are many hurdles upon which the deal may fall. Therefore, getting the business sale-ready and attractive before potential buyers start to circle is essential and it’s never too early to start planning for your sale. So how can you ease the course of the sale?
ONE Deal breaker: lost leaders
For many businesses, the outgoing owner will be inextricably linked to its past successes, in many cases having built it up from scratch, winning contracts and managing strategy and performance. You don’t want buyers to feel that the business couldn’t stand up without the owner, or that only he or she holds the key relationships.
Deal maker: succession plan
In an ideal world the owner will begin handing over responsibility to others to show potential buyers that knowledge will remain. It will be important to build a competent level of management early on in the process and to ensure there are no weak links in the key strategic positions. To aid this, you should carry out a full due diligence assessment on all management and staff to show the levels of capability in the business.
TWO
Deal breaker: lack of internal support for the deal
Morale often decreases with uncertainty about the future of a business and poor morale may cause high staff turnover, which in turn does not look attractive to potential purchasers.
Deal maker: effective reward plan
People will very often represent a significant proportion of the value of
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the business, so you need to have smart reward strategies to make sure that they are tied in and have a stake in maximising the value of the business. What’s more, it’s important to get all staff pulling in same direction so it’s worth reviewing your reward strategies or incentive and retention plans. This can be a sound strategy since a future purchaser would be effectively paying the cost of the incentivisation. Particular attention needs to be made towards retaining key people and developing the ’rising stars’.
THREE Deal breaker: lack of clear focus
A buyer will be looking for a business that has a clear strategy in place for the future; and one that has been able to leverage what it’s best at into a competitive advantage within the market. Primarily, a buyer will be looking at whether a business has got a clear focus.
you’ll be in trouble. Deal maker: action plan
To help potential buyers see your focus, build a clear set of strategic goals and fully identify your critical success factors. Formulate an action plan and put in place robust delivery processes to make sure the company is performing at its best for potential buyers.
FOUR
Deal breaker: untested business processes
Leaving it too late to run a business health check on your procedures may leave buyers feeling there is not enough time to make the necessary improvements around any serious issues raised by the buyer to negotiate a reduced price.
Deal maker: due diligence ’test’
Perform a vendor due diligence test, ie, not just a financial test but a test of other areas, such as environmental, and health
THE BUSINESS MAGAZINE – SOLENT & SOUTH CENTRAL – NOVEMBER 2012
and safety issues. When preparing for due diligence, attempt to identify the most important key performance indicators (KPIs) which the potential purchaser will use to value the business during due diligence. For issues that arise after a potential buyer is interested, it may be helpful for them to see a timetable of when corrective actions will be implemented.
FIVE Deal breaker: lack of tax planning If you don’t,
It’s not all about the buyers, sometimes the seller can cause a deal to fail. For example, you’re charging ahead with the sale, you’ve begun coveting the perfect buyer and the deal is now coming to fruition. But you’ve realised, too late, that going ahead with the sale at this time will trigger a potentially huge tax bill.
Deal maker: financial test
Talk to your tax adviser early in the process as they can help you navigate the sale process, make sure you can take advantage of any planning and advise on the best time to sell. They will be able to help you understand what you ultimately realised from the deal.
In short, the key to safely negotiating the difficult path of a sale lies in acting early and responding to any issues quickly. Plotting the activities you can carry out at the various stages of a sale will also help.
Details: Paul Stout 023-8038-1265
paul.stout@
uk.gt.com
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