If you’re seriously considering selling your business, the decision is rarely just financial.
You may have spent years – perhaps decades – building the company. Your wealth may be tied up in it. Your employees, customers and reputation matter to you. And alongside the excitement of what comes next, there can be a very real sense of uncertainty about how you turn everything you have built into a successful exit.
For many business owners, a sale will likely also be the largest and most complex decision and transaction they ever undertake.
That’s why preparing for a sale isn’t simply about finding a buyer willing to pay the right price. The structure of the deal, the legal terms you agree to, the tax implications and the way the process is managed can all have a significant bearing on what a successful outcome ultimately looks like.
Headline Price Considerations
Receiving an attractive offer can feel like the moment you’ve been working towards. But agreeing a valuation is only one part of a transaction.
How and when will you be paid? Is some of the consideration deferred? Is there an earn-out? Will you retain any equity? What warranties and indemnities are you being asked to provide? What happens if circumstances change between agreeing the deal and completion?
These are not details to address at the end of the process. They are fundamental to understanding what you are actually agreeing to and the value you ultimately receive.
Even the basic structure of a transaction can have important consequences. A sale of shares, for example, is fundamentally different from a sale of the underlying assets of a business, with different legal and tax considerations.
Due Diligence: Seeing Your Business Through a Buyer’s Eyes
Once a serious buyer is engaged, your business is likely to come under a level of scrutiny that may feel unfamiliar.
Financial performance, contracts, employment matters, intellectual property, property, compliance, disputes, liabilities and corporate records can all form part of the due diligence process.
For an owner, this can be one of the more demanding stages of a sale. You are still running your business while simultaneously answering detailed questions about it, often knowing that an issue uncovered during due diligence could affect negotiations.
Good preparation makes an enormous difference.
Identifying potential issues before a buyer does gives you and your advisers time to understand them, address them where possible and decide how they should be presented. It can also help maintain momentum and reduce the risk of unexpected issues becoming negotiating points later in the process.
Protecting Yourself After the Sale
The legal documentation surrounding a business sale doesn’t just determine what happens on completion day. It can define your responsibilities long after the money has changed hands.
The sale agreement may contain warranties about the business and specific indemnities relating to identified risks. There may also be restrictions on what you can do next, conditions attached to deferred payments or earn-outs, and obligations that continue after completion.
This is where an experienced commercial legal adviser becomes invaluable: not simply documenting a deal, but understanding the commercial context, identifying risk and helping negotiate terms that properly protect your interests.
Different Perspectives
A successful business sale typically requires expertise across several disciplines.
Your corporate finance adviser manages the overall transaction, helping prepare the business for sale, position it appropriately, identify and engage potential buyers, negotiate the commercial terms, manage due diligence and maintain momentum through to completion.
Your accountant and tax adviser helps you understand the financial and tax implications of different structures and ensures the financial information underpinning the transaction stands up to scrutiny.
Your legal adviser handles the legal transaction documents, advises on warranties, indemnities and other contractual protections, and helps ensure the agreement reflects the commercial deal you believe has been agreed.
And your personal wealth adviser can help you consider what the transaction means for you personally – because selling the business is only part of the picture. What happens to the proceeds, and how they support the life you want afterwards, deserves consideration well before completion.
The important point is not simply to have each of these advisers. It is to have them working together. The MGroup provides Corporate Finance, Accounting and Tax advice from its team of experts. They have also built a panel of trusted professional partners, allowing the full advisory team to be completed.
Build Your Team Before You Need It
One of the biggest advantages you can give yourself is time. Bringing your advisory team together early allows potential issues to be identified before they become deal issues. It allows tax and transaction structures to be considered before decisions have already been made. And it means that when a buyer is sitting across the table, you are negotiating from a prepared position rather than reacting to events.
Tax planning is a particularly good example. Reliefs may be available when selling a qualifying business or shareholding, but eligibility can depend on conditions that need to have been met before the sale. Tax therefore needs to be considered as part of the exit planning process, rather than once a deal is approaching completion.
The Impact of Expert Advice and Support
There is inevitably an emotional element to selling a business you have built.
It can be difficult to remain detached when a buyer questions your forecasts, challenges a valuation or identifies risks in a company you know better than anyone else.
A strong advisory team brings experience and objectivity to those moments. They can challenge, when necessary, negotiate on your behalf and keep sight of the wider objective when the detail of a transaction threatens to become overwhelming.
Most importantly, they allow you to continue doing what remains critically important throughout the sale process: running a successful business.
At The MGroup Corporate Finance, we work alongside business owners and their wider professional advisers to manage the sale process from preparation through to completion. By bringing the right expertise around the table early, we help owners understand their options, prepare properly and approach one of the most important transactions of their lives with greater clarity and confidence.
If selling your business is beginning to move from a future possibility to a serious consideration, this is the time to start the conversation. Partner, Geoff Pinder, is ready to help you get started and can tell you about our Business Exit Review, email g.pinder@themgroup.co.uk