Businesses 'need to be in good shape if they want to sell'
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The past
four years have been tough for all businesses – but those that
have survived are now lean and robust and their debt levels have
been reduced, as have costs, says Mike Norrie of Castle Corporate
Finance (pictured).
Alongside this, cash flows have tightened and margins
sharpened.
Baby boomer business owners, who might have sold and retired a
few years ago, have held on in the hope that 2006 business values
will return. Such entrepreneurs are now four years older and it
seems as if those "good old days" have gone.
Over the same period, larger trade buyers have been building
cash balances in their balance sheets and private equity has cash
funds to invest. Too much cash is not a good balance sheet
investment in these low interest times – indeed it can be an
embarrassment for a PLC.
So, for owners planning retirement, 2012 could be the year to
sell – as there is little point in postponing longer. Deals are to
be done with good cash buyers who are not dependent on bank
borrowing. Coupled with this, the tax environment for retiring
business owners has rarely been so benign.
If you are ready to sell, there's likely to be a buyer out there
for you. The question is – at what price?
Buyers are ready to spend but rarely have they been more risk
averse.
They are only interested in high quality targets, while the due
diligence process has never been so painstaking.
To sell your business at the best price, preparation is key.
Here are 10 questions you should consider:
- Is the company dependent on you or is there good second tier
management?
- Do you have regular management accounts prepared and do you
operate to a strict cash and margin budget?
- Is your business dependent on too few key customers or on a
single major supplier?
- Have you developed brand value and marketing profile?
- Is the business properly funded with adequate working capital,
stock and debtors/creditors accurately stated?
- Do you have a proprietary product/service? Is your intellectual
property protected?
- Are all commercial contracts watertight?
- What have you done to differentiate your company, to make it
shine out among the competition?
- Are your accounting policies commercially sound and are
revenues properly recognised?
- Have you considered having your accounts audited, even if you
are within the exemptions?
The sale of your business is not only the biggest deal of your
life, but also an adventure you have probably not experienced
before.
The challenge today is completing a deal at a full price and
with a fair structure. To do this, it is essential to retain
specialist advice at the outset.
Appoint a qualified corporate finance adviser to work with you
and your regular advisers to plan and manage the transaction – from
start to Champagne.
- Mike Norrie can be contacted via email or by calling 01732
400123.
Wednesday, December 14 2011
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