ICON66 – Volume 5
Show Me The Exit – 3 Steps To Heaven
Most vendors will only get one crack at selling a business. It’s clearly a very significant event in ones life and needs thorough planning and professional execution to ensure that you get the best possible deal. You wouldn’t sell your house to someone who just knocked on your door, you need to market it properly, create a competitive environment and manage the process to make the most from the sale.
Stage 1. Preparation
Grooming
The first step
in selling
any business
is preparation
and that should
ideally be
12 months before
talks start.
There are two
main types
of preparation:
Housekeeping
Get your house
in order and
sort out housekeeping
issues such
as litigation,
disputes, selling
peripheral
assets, renewing
contracts that
have lapsed,
formalising
informal business
arrangements,
selling or
closing non-core
business units
and basic tax
planning. Due
diligence will
then be much
easier.
Profit
Purchasers
will undoubtedly
look to value
your business
based on sustainable
profits and
effort should
be made to
maximise these
profits leading
up to the sale.
By maximising
revenue opportunities
and reducing
costs; profits
and therefore
value can be
enhanced.
Appoint
advisers
In appointing
corporate finance
advisers you
need to consider
who is the
right firm
for the job.
You will find
no shortage
of corporate
finance professionals
with understanding
of the sale
process. However,
you also need
to ensure they
have other
qualities too,
including a “relevant” track
record, contacts
or research
capability
to identify
the strategic
buyers. You
should also
look for a
hunger, commitment
and enthusiasm
to see the
process through.
Ensure you
meet with all
the advisers
that will be
handling your
deal, not just
the partners
who may hand
it down to
the junior
members of
the team. It
takes 6 months
or more to
sell a business
so you’ll
also need to
ensure you
have a good
chemistry with
your adviser,
make sure that
you can get
along – you’ll
be seeing a
lot of each
other during
the process.
Prepare
Sales Memorandum
The Sales Memorandum
is prepared
by your adviser
and will become
the main marketing
document. It
needs to contain
enough information
to allow a
buyer to make
an indicative
offer for the
business and
should paint
a compelling
growth story.
It needs to
be a balance
between being
thorough and
disclosing
important details,
whilst retaining
the confidentiality
and integrity
of the business.
It also needs
to be the right
blend of fiction
and fact, buyers
will expect
some optimism,
it is a marketing
document after
all, but it
needs to be
realistic.
Research
targets – key
relationships
Any adviser
worth his salt
will have a
database of
potential buyers
and know them
well. In addition,
specialist
research will
need to be
carried out
to identify
other strategic
buyers. The
key is to identify
those buyers
to whom the
acquisition
would be strategic,
for instance,
where there
is revenue
or cost synergy
or where there
is a geographic
gap – these
buyers can
justify paying
a premium.
In niche businesses the list of potential buyers may be very small (5 or 10) but in some service businesses or hot technology areas the marketing campaign would be much larger. You should expect to target as many overseas buyers as domestic ones.
