Top 10 tips for preparing your business for sale
For many, selling a business is a once-in-a-lifetime event and for those who are unfamiliar with the process, it can be very daunting. Business owners are forced to juggle running their business and dealing with seemingly endless requests for information from the buyer.
Below are a few best practice tips on how to prepare your business for sale, to help ensure a smooth sale process and give the buyer the impression of a well-disciplined and carefully managed business.
- Financial Matters – Financial due diligence is one of the most important elements of a buyer’s due diligence. The buyer will be concerned with historical financial statements as well as the reasonableness of projections for future performance. It is crucial that all of the information provided is accurate and verified. If the figures provided do not add up, then the credibility of the seller will be weakened.
- Company Books and Filings – Check that all Companies House filings have been made and the company’s statutory books are up to date. Failure to file or filing errors do not create a good first impression. Errors in statutory books if not spotted prior to disclosure can be costly to remedy.
- Existing Arrangements – Review agreements with key suppliers and customers. Make sure that they are all recorded in writing, signed and dated. Check also whether any third-party consents are required on the sale of the business. This will be a key consideration for a buyer in deciding whether to proceed with the acquisition.
- Debt – If the company has any secured bank debt, collate all of the paperwork, so you can provide it to the buyer for its review. Companies do not always have these documents to hand and it can be difficult to source the paperwork from the bank. Bank cooperation will be needed if the buyer either wishes to keep the bank facility or if the facility needs to be removed at the point of completion. Keep the bank informed at all stages to avoid any delays.
- Employees – Check that all staff have signed and dated employment contracts and all required employee manuals and policies are in place.
- Intellectual Property – Identify key pieces of intellectual property owned or used by the company (e.g. domain names, logos etc.). Ensure documents are in place to verify either the company’s ownership of the intellectual property or its right to use it. Where consultants have created intellectual property for the company, ensure they have assigned the ownership of the intellectual property to the company.
- Premises – Collate all documents necessary to verify title to the premises out of which the business operates. If any alternations have been carried out, ensure any permissions needed were obtained. If the company owns the premises, consider whether the buyer will want to acquire it, or should some form of pre-sale restructuring take place. If the premises are leased, consider whether there are any dilapidation issues. If the seller or his pension owns the premises, consider whether the buyer would want to lease the premises and on what terms.
- Insurance – Ensure that all necessary policies are in place and all premiums have been paid. Gather copies of all policies and insurance certificates. Details of any recent claims or ongoing claims will also be required.
- Confidentiality – Keep discussions around a sale restricted to the smallest number of people possible as it can be destabilising for staff, it could damage client relationships and competitors could seek to take advantage of this information by trying to portray the sale in a negative way.
- Advisers – Appointing experienced financial and legal advisers from the very beginning will make the sales process less daunting and run smoother. It will save time and money in the long run.
Kerman & Co has extensive experience in advising owners on the successful sale of their businesses. We can assist owners from the initial preparation stage, right through to completion.