
Failure to prepare properly before selling your business and neglecting to tightly manage the sales process itself can result in a disappointing outcome. You may not find a buyer, may fail to achieve the price you want for your business or the sale may fall through in the later stages of a deal because of due diligence issues or other disruptive events.
However, there are steps that you can take in the pre-planning stage of a business sale and during the execution phase of the process that can minimise these risks and help you push a deal across the line at your target price.Search broadly for buyers
The search for potential buyers must be as broad as possible. Look across both trade and financial buyers, even if your business appears to be the obvious fit for one versus the other. To assume just one sort of natural buyer is to limit your options. Look internationally – some 50 per cent of buyers that Cavendish has been involved in over the past 18 months have been based overseas. For example, when we advised on the sale of the Royal Berkshire Shooting School Group in 2010 we used our international reach to facilitate a sale to a Chilean private investment group. This certainly wasn’t an obvious buyer – partridge and pheasant shooting is more Sandringham than Santiago – but resulted in the best price. Have strategic conversations with companies well before a sale. Large businesses are very much following their own corporate agendas in terms of the timing of their purchases. With the market being dictated to by corporate agendas, it is wise for enterprises that may be considering a sale to sound out in advance whether and when key players may be looking to make acquisitions.Achieving a high valuation
The critical issue of pricing can derail the sale of a business at two points: either at the outset, if you do not prepare the groundwork sufficiently to support a strong valuation, or at the later stages of a deal if you are unable to pre-empt “price chipping” by buyers in negotiations.1. A strong market report
Buyers may express concern that the market’s prospects are less good than initially perceived. You must be able to pre-empt this with a compelling case for the strength of the market and sector outlook. Conduct in-depth market reports focusing, in particular, on your sector’s growth potential.2. Compelling financial forecasts
As an enterprise you need to be able to demonstrate that you have met targets and show that your future prospects are strong, with clearly delineated forward targets and a compelling rationale for your expectations that you will meet them.3. A comprehensive management plan
Potential buyers will often look to lower the price with concerns that the management platform of the company is not as strong as it had looked. Again, by clearly outlining the company’s strategic future in terms of personnel issues – who will stay on after a deal and what lock-in terms will ensure a strong management going forward – you are in a position to show that the right people will be in place to lead the business and defend against price objections.4. Pitfalls to avoid during the sales process
As well as preparing in advance to counter any price depreciation during a sale negotiation, be wary of process-related problems that could cause a deal to founder.When you go exclusive with a potential buyer, ensure that all relevant data – whether good or bad – is available to the other party.
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