The ‘Perfect’ Business Sale – Selling A Business
In this broadcast, Kevin Uphill and Tim Hardman discuss the different types of exits, the steps to the perfect sale and the timeline of selling a business.
The webinar is available below, however, first we shall talk about the ‘perfect’ business sale that is ‘easy to define but hard to align’.
Despite the huge distraction caused by the COVID crisis, buyers are still highly active as they continue to refresh business models and look to create increased yields. There is plenty of money, but too few opportunities. Valuations for businesses have held despite the pandemic and post-lockdown models are continuing to drive deals.
Many sellers are also choosing to act with the prospect of more tax hikes on Capital Gains looming – possibly doubling in April 2021 (or sooner). If you are considering selling a business, now may be the time, regardless of COVID uncertainty, to do so.
Timescales and Managing the Process When Selling A Business
This is a project, and its efficiency will depend on how it is initially set up. There are many techniques, tools, and advisors to help when it comes to selling a business, so rather than a detailed analysis, we are concentrating here on the context of how to best manage the process. We see this as steps on a timeline, which of course will be dictated by the transaction itself and both the buyer and seller motivation. Typically, a deal can be completed in three months from agreement, but sometimes it can be much faster, particularly where funders are not involved, or if you decide on selling a business to an EOT.
- Be clear on roles: the project leader, usually the M&A adviser, needs the trust of the buyer and seller as well as strong administration, operation, organisational and, increasingly with the advent of data room management, IT skills.
- Agree timeline objectives: run concurrent streams rather than a step approach. Make sure that everyone has the details of all contacts and is prioritising availability.
- Stick to the schedule: deals with unending negotiations can experience ‘deal fatigue’ and the transaction is less likely to happen.
- Involve and Communicate: like any project, clear and shared collaborative tools are essential. Asking key management early on how they want to get involved can also help relationships later. A weekly update with all key parties can also be a critical tool. Make sure your advisers are talking regularly, that they are flagging issues and noting documents of interest to each other. Any truly ‘material’ due diligence issues will have implications spanning across all areas – legal, financial, and commercial. It is also useful to have face-to-face interviews with the key management of the target company to obtain first-hand information and/or clarification regarding specific issues. Often sellers will restrict access until milestones are achieved and this is a reasonable stance.
- Reports: long reports to justify fees are not acceptable. The approach is to seek concise reports with executive summaries and then support these with well- catalogued and indexed data. For example, if there is an issue with terms and conditions, highlight the issue and link it to the data room and the actual indexed terms and conditions.
- Collaboratively adjust: as information flows, make sure this is shared. Any focus points can be highlighted, and issues or challenges addressed at each point. If there are potential showstoppers, deal with them as you go and discuss the issues between the parties. The approach is not to create attrition on deal value, but rather to reinforce value and shape the deal around any challenges.
- Prioritise: detailed due diligence on the target company is always recommended but high-level reviews can be helpful to highlight red or yellow flags, that is, areas that require further investigation.
Ultimately, effective negotiation between all parties is the difference between success or failure when it comes to selling a business. No business sale would be right without one, in effect, it is the centrepiece of selling a business, everything else is merely the bread keeping the sandwich together.