Date post: | 18-Jul-2015 |
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Business |
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About usLorna Watson
Director
Corporate Finance / Tax Support
Peter O’ConnellHead of Corporate Finance
Why Sell
Retirement – no succession in the business
Ill health
Release cash – Other priorities
Toughening market
Opportunistic (unexpected offer made)
Consolidation of the business (e.g. non core activity
being sold)
Valuation
Definition
The value of a business is the price at which a business will
be sold by a willing purchaser to a willing buyer
Understanding how people value businesses is key
Price Earnings multiple most common
Can use Discounted Cash Flow or Net Assets
Preparing your business for sale
Commercial Maximising Profit / EBITDA
Maximising Multiple
Eliminate non core activities
Legal & Financial due diligence
Tax Corporation tax
PAYE & National Insurance
VAT
Maximising Value: Vendor Actions
Remove risk – deal with legal issues
Customer contracts
Supplier contracts
Tidy up employee issues
Ensure employment contacts in place
Can the business survive without you?
Management team
Intellectual property up to date
Maximising Value: Advisor Actions
Market the business for sale
Create competitive tension during sale process
Surplus cash – how to deal with
The Process (part 1)
Buyer Research
Prepare Sales Memorandum
Finalise ‘A’ list of potential acquirers
Prepare a brief summary of the opportunity
ADDING VALUE
Understanding the target market and value drivers for potential acquirers
Packaging the opportunity
Focussed and targeted approach to potential acquirers
Ensure potential buyers understand the opportunity with minimal input
TIM
E
Approach buyers and sign up interested parties
Establish a market and test our audience before compromising confidentiality
The Process (part 2)
Despatch Sales memorandum and control the bid process
Review indicative offers and shortlist a select number of
bidders to access the date room
Review final offers and choose preferred bidder.
Enter exclusivity
Assist in the preparation and delivery of management
presentations
ADDING VALUE
Ensure vendor control to maximise competitive tension
Assist in understanding, evaluating and maximising offers
Select the right buyer
Ensure potential acquirers have sufficient understanding to present a firm final offer
TIM
E
Support legal, financial and commercial negotiations as necessary to a successful
completion
Drive and control the process to a successful completion
The Process (part 3)
Post Completion
ADDING VALUE
• Assist with post completion matters including:
• Completion accounts
• Earn-out determination
• Taxation issues
• Warranty issuesTIM
E
Identifying Potential Purchasers
• NOT Brokers or Business Transfer Agents
• Direct approaches to decision makers, not scattergun approach
• Own research using professional search tools and software
• Leverage professional network of lawyers, accountants etc.
• Contacts within VC / Private Equity community
• Database of MBI candidate and HNWI’s
• Suggestions from owners
Management buy out / in
Potential option if trade sale is not available
Enables you to reward management team for working in the
business to date
Funding is always an area of concern
Potentially look for equity investment for this option
Often sale at a discount compared to trade sale making the latter
more attractive
Taxation considerations
Sale of shares or assets?
Entrepreneur’s relief (ER) – 1st £10 million at 10% rate of
Capital Gains Tax
Qualifying rules for ER
Surplus cash – is it an issue?
Deferred consideration & earnouts
Employment related securities
Timescales
TIMESCALE
Planning Stage(Teaser, IM, Research)
4-6 weeks
Marketing Stage(Approaches, discussions, meetings, offers)
3-6 months
Completion Stage(HOT’s, DD & legals)
4-6 weeks
The Documents
Confidential 1 page summary
Information Memorandum
Non Disclosure Agreement / confidentiality agreement
Heads of Terms / Heads of Agreement
Sale Agreement
Warranties
Tax Covenant
Restrictive covenants
Why us?
High quality advice available locally
Genuine investment in understanding the business, its key attributes
and the market drivers
Creative solutions
Joined up tax and corporate finance advice
Experience
Commercial input into legal documentation
Highly proactive project management to drive the transaction
through to completion
Conclusion
Prepare the business for sale
Plan the process properly
Get the timing right
Be aware of tax issues
Ensure the structure is set up correctly