HR & Management

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How to sell a business (10) – management

4 Mins

It’s one thing to have a plan and quite another to present it. My Heads of Terms now run to seven pages. My fear is that if I present this as an offer, the buyer or their adviser will say it’s too complicated for the size of the deal and just not do it.

So I prepared a summary and shared it with the management team, which I need to do. I met them individually, so that each gets my full attention and each feels that they are being heard. I reminded them of what we propose and spelt out what it means to them.

It’s amazing what people don’t hear. I explained to each of them that the best way to maximise our returns is to have no salary. This is not feasible but I have asked the MDs to agree to a fixed salary of £100k which means waiving their bonuses. One asked if this only applied if the deal went through? Er, obviously. 

Another was worried about his bonus not being paid; so worried in fact that he asked about it twice. I then pointed to the numbers on the summary sheet where he gets over 1/2m, on conservative assumptions, about £100k for each year of service. “Oh. OK.” Not exactly jubilant. I have also added a clause in the Heads that asks for a bonus based on increases in profits after the earn-out period.

Then we sat down together to be comfortable that we all were in agreement. I remembered that I had forgotten to mention the fees payable to lawyers and our agent. I said that the way I proposed was for the founders to pay on signing of the contract and then to re-claim shares from the others when they received some money. 

The co-founder went red on his neck (always a good place to look) and was very assertive in stating that I hadn’t mentioned it before. “No, nor that you stand to do very well out of this deal and only you and I will get cash on day one,” I thought. Is there any pleasing some people? 

In my experience, when major events come onto the horizon, behaviour changes, and not for the best. My job is to stay calm among all this, otherwise the deal will fall down as people start behaving emotionally and stop negotiating sensibly. Thank goodness for an understanding wife who can share my burden at the end of the day and stop me getting emotionally entangled. 

It helps me too if I remind myself that no-one is indispensable. The buyer wants a company not an individual or two.

Getting closer to crunch time, when we put a proposal to the buyer. Just want to tidy up the terms and then take a deep breath, you know, like when you jump from the top diving board. Procrastinating? Find out tomorrow!

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Private equity deals and exits continue to decline
Sarah Anglim
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