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Ask The Experts: Exit Strategy

Thinking of selling your business or planning an exit strategy? Emma Lewis, a Corporate Law specialist from Slater Heelis, offers advice on how to get the best value for your business.

Q: I have been running a company for a number of years and am considering selling up to provide for my retirement. What do I need to do to achieve the best value for my business?

A: The price that you can obtain for your business will depend upon a number of factors, some of which are highlighted below.
The good news is that the most important things that purchasers will look at are things that you can deal with well before your anticipated sale.

The main areas where the value of your business can be maximised are as follows:

  • Contracts - you should ensure that these are adequate, well drafted and up to date. If a purchaser reviews these and considers them to be inadequate or onerous, they may look to reduce the price that they pay for the Company.

  • Employees - a purchaser will want to know that the Company does not face a potential liability in respect of any of the employees. Ensuring that your employees have clear written terms and conditions and that you have adequately dealt with any grievances or complaints as well as following correct procedures in respect of any redundancies or dismissals means that the likelihood of an employment claim arising will be diminished. In addition, if your business is reliant upon a small number of key individuals, a purchaser will look to ensure that those individuals are happy and are tied to the Company by way of robust employment contracts and/or other incentives.

  • Property - most businesses will have some sort of interest in a property, whether they rent or own it, but issues with your property can give rise to significant liability which a purchaser would look to take into account when valuing the Company. Carry out inspections on the property to ensure that the Company does not face any liability in respect of it. You should also check the lease(s) to remind yourself of the important terms and to ensure that the Company has complied with all covenants contained in them.

  • Intellectual Property – this is increasingly an important asset. Ensure that all appropriate intellectual property is registered and ensure that all intellectual property used by the Company is owned by the Company.

  • Litigation - most businesses may have been involved in some form of litigation at some stage but if you take steps to ensure that such litigation is managed properly and settled quickly where appropriate this will help minimise the amount of any liability that the Company has and therefore help to preserve its value.

  • Minority Shareholders - many private limited companies have minority shareholders. These minority shareholders may not agree to the sale and could prove destructive to the sale process causing a purchaser to pull out. Ensure that documentation is in place to force these shareholders to sell their shares if a genuine offer is made for the Company.

The above is a non-exhaustive list and other considerations may be pertinent depending upon the nature of the Company. However, addressing the above well in advance of an anticipated sale means that when the time does come to sell, the company should be very attractive to a purchaser which will help you to achieve the maximum value for the Company.

The next steps will include identifying who the prospective purchasers will be. Are any of your staff potential purchasers? This may be attractive to you and the rest of the employees.

If the prospective purchaser is likely to be a competitor, venture capitalists or another third party ensure that you get accountancy advice and legal advice from the outset. Accountants/corporate financiers/business agents will be able to assist you with providing a valuation on your business and may be able to assist you with the marketing of it to ensure that you get as high a price as possible. Before sending out any confidential information to a prospective purchaser you should enter into a confidentiality agreement to ensure that the Company’s information remains confidential.

More information about the services provided by Slater Heelis can be found on their Hub partner page

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