Corporate finance:
Selling a business

Pre-sale planning

Many businesses require grooming for sale. There may be a need to recruit management, so that the business is not dependent on its founding shareholder. Or it may be necessary to create incentive schemes for management and staff, so that a buyer will know that key people have good reason to stay. There may be too much reliance on a small number of customers or suppliers. Broadening the base will enhance the quality of the business. There may be technical, regulatory, or market uncertainties that have to be resolved before the business can be sold. Our role is to identify what needs doing and to guide you through the process.

Many corporate finance advisers focus only on the sale, and ignore the tax consequences. What matters to you is what you finish up with after tax. Our corporate finance advisers think tax. Tax planning is often a long term project, where the timescales sometimes involve years rather than months. It is never too early to be planning your exit.

The sale memorandum

In order to sell your wares, you need to put them in the shop window. That is the function of the sale memorandum which we will prepare. It is a substantial document, describing your business: the goods or services you sell, your customers, your suppliers, your competitors, the markets in which you operate, your premises, your intellectual property and other assets, your management, your financial history, and your plans and forecasts.

The process of preparing a sale memorandum is valuable. It brings a spotlight to bear on all aspects of the business being sold, enabling you to show strengths in the best possible light and providing an opportunity to identify and correct weaknesses before they are revealed by the buyer�s due diligence.

Many business people are, naturally, reluctant to disclose commercially confidential information. Although no buyer gets a copy of the sale memorandum until they have signed a confidentiality undertaking, there is always a possibility of some �leakage�. We will ensure that information is not given to anyone regarded as a particular threat. In particularly sensitive situations, we will not advertise the opportunity generally, but will offer it discreetly to selected targets or to a network of trusted connections.

Finding the buyer

We have a network of business connections who are in the market to buy certain types of business, and of fellow corporate finance professionals with their own acquisitive clients and connections. It is also possible to advertise an acquisition opportunity through the financial press and through certain specialist registers.

But perhaps the real weapon in our armoury is technology. There are now many databases of company information and of corporate deals. Such databases exist for all major economies. We subscribe to such databases, and we have on our team a researcher who knows how to get the best out of them. That helps us to find prospective buyers for any type of business. If a business is best suited to being sold to an international buyer, we have the resources to achieve that too.

There is an art in approaching prospective buyers. The key document is a one or two page �flyer�, summarising the opportunity. Our skill lies in ensuring that it is an attractive document that clearly and concisely sets out the acquisition opportunity in a way most likely to generate interest.

Negotiation, due diligence, and contract

Of course there comes a stage when prospective buyers are negotiating a deal. We have the expertise and experience to judge what your business is worth and to persuade buyers to pay it. It helps to have the resources to research the buyers, to know their strength, to study the deals they have previously done, and to understand what they can afford to pay.

When a deal has been done and heads of agreement have been signed, due diligence and contract negotiations are the next stage. If you are selling a business for the first time, you may be surprised how many points of contention arise at this stage. This is often the hardest phase of the negotiations. We will work closely with your lawyers, we will pay close attention to detail, and we will be attuned to the tax implications of any proposed changes to the terms or structure of the deal.