Key Players When Selling a Business
Typically selling a business will be one of the most important transactions a business owner will ever undertake and having the right advisers in place can be critical to achieving the right result. This article briefly explores the role different advisers can play:
Business Broker (Required)
The business broker tends to be the glue that holds everything together and thus is key to managing a process that delivers a successful result. They will be involved all the way from considering a sale, through to legal completion and beyond if there is a deferred element to a deal. Key responsibilities are to help the seller prepare the business for sale and advise on a realistic valuation, lead marketing activities to attract serious buyers, support buyer meetings and coax parties through the negotiating stage to Heads of Terms and finally support the seller through due diligence to legal completion. A good broker should only charge modest upfront fees (sufficient to ensure commitment from the seller), with the majority of fees contingent on success.
Accountant (Required)
Accurate and timely financial information is key to a successful sale process, including both statutory accounts being produced in a timely manner and also monthly management accounts. As soon as a buyer is seriously engaged, they are very focused on understanding the current performance of the business.
In addition the accountant will advise on different tax issues, including potentially the implication of a share sale versus an asset sale and is heavily involved in the due diligence process. If a seller’s accountant is a ‘one man band’ it is important to understand in advance how they will be able to support the due diligence process, where in the latter stages of a deal, debtor reports can be required daily.
Corporate Solicitor (Required)
The solicitor will draft the legal documentation and also coordinate the due diligence process, including potentially the set up of an electronic data room. There are typically warranties and indemnities that can run to many pages in the Sale & Purchase Agreement and the solicitor will guide the seller through these. Payments will also be routed through the solicitor. A seller should not appoint the ‘family solicitor’ – business sales are a specialist skill and the seller’s solicitor MUST have corporate experience.
Financial Adviser / IFA (Optional)
Having an idea of how the funds raised from a business will be subsequently used, in advance of the sale, will help to optimise the transaction from a tax viewpoint and can even change the decision as to whether to sell shares or assets. For example, it may make sense for the company to make pension payments ahead of a sale, or settle director loans . Therefore, if a business sale is likely to raise substantial sums, it is advisable for a seller to discuss options with their financial adviser in advance.
HR Specialist (Optional)
While the solicitor will go through employee contracts etc as part of due diligence, that can be problematic if they are found not to be robust, or even non-existent at a fairly late stage in the sale process. It can be prudent to engage an HR Specialist to review all aspects of HR as part of the pre-sale process, including contracts, application of H&S law, employee records, pension schemes etc.
Cost Reduction Specialist (Optional)
For profitable businesses, value is normally broadly related to the future earnings capability of the business. It stands to reason therefore that any cost reductions that can be ‘booked’ and that improves the financial performance of the business, can favourably influence the price.
Painter / Decorator (Optional)
It may seem trivial, but aesthetics can matter when it comes to selling a business. A smart organised office / warehouse / factory suggests smart organised processes behind the scene!
At Morton Christie Business Brokers we have a number of contacts that we are confident in recommending. If you are considering the sale of your business and think you have a ‘gap’ in your team, talk to us and we will be happy to make introductions that can at least help you get the ball rolling.
Recent Comments