Grooming the Business For Sale

Grooming is a process for preparing a business for sale and making it as attractive as possible to prospective purchasers.  To properly groom a business for sale make take two or three years.  Even if you don’t have that long it is worthwhile undertaking whatever steps you can to groom the business as these will pay off and a higher price will be achieved.

Even if you have no intention to sell at the moment, you might take heed of the advice I learned long ago “… run your business as if you are going to sell it tomorrow. Just in case you have to!”

We suggest you consider the following 10 steps

1. Make sure your shareholders’ agreement is up to date and that that it has the appropriate provisions to facilitate the sale where you may have dissenting minority shareholders i.e. tag-along and drag-along provisions.
2. A potential buyer will carry out a due diligence process which will cover legal, commercial, tax and accounting aspects of your business so make sure your house is in order. If there are any weaknesses or “chinks in the armour” the purchaser will use these to reduce the price and go for an asset purchase rather than a share purchase.
3. Reduce dependence on yourself in the period leading up to the sale. A buyer will have concerns that once you have gone, the business may suffer. You must be able to demonstrate that there is a good management team who can run the business without you.
4. Maximise your own taxation position – ensure that good expertise is available to you – planning is so important as once the sale is done it may be too late!
5. Ensure you have a great team of experienced professionals (legal, accountancy and tax) to lead you through the process. The right team at the right time will help to structure the deal that is best for you to be able to maximise your value; give tax efficiency, and to see that you have protection from onerous clauses in all documents especially the Sale and Purchase agreement and all subsidiary agreements. Don’t get too concerned about the cost of advice, the right team will ‘pay for themselves’.
6. Prepare, or have prepared, a robust Information Memorandum (IM) for the sale that will ensure your business can be properly marketed. This can then be distributed to interested parties who will sign a pre-prepared confidentiality agreement to protect commercially sensitive information. This should be prepared by experts and then made available to those who will be selling for you – these people may also be able to assist with targeting your buyer prospects.
7. Prepare your own valuation of your business. This might be prepared by an appropriately experienced and qualified accountant using recognised methodology which will stand up to the scrutiny of the investigating purchaser’s advisers.
8. Prepare a business plan that identifies strengths, weaknesses, opportunities and threats, (SWOT analysis). This will demonstrate that you have a strategy, show that you know your business and have a clear vision for the future.
9. Like selling your house, prepare your business and premises for inspection. Make sure it looks clean and efficient, all stock and the office is tidy, annual accounts with compliance issues dealt with and management accounts up to date. This will demonstrate professionalism and control.
10. Don’t leave it too late. Plan your exit strategy that gives enough time to adequately prepare you to maximise the return on your time and effort in building up your business, which could take years.

Investor Properties Limited are well experienced in the above and we can create that team of professionals for you that will result in your maximising your sale price.  Remember this may be the biggest sale of assets you ever make!

For information relating to grooming the business for sale click here.