Have you got the right team for your sale?

For company owners and shareholders, selling a business demands a carefully assembled team of professional advisors and technical specialists. The complexity and potential pitfalls of this process require expert preparation, financial analysis, arm’s length negotiation (to protect the seller from the process), deep experience in deal and contract management and constant clear and managed communication.

This means that from the initial idea of the sale, through to marketing the business and eventually negotiating/completing on a deal, having the right advice will protect your best interests at every stage.

Below we explore the different advisors that can have a significant impact on your sale and guide you to a successful completion:

Sell side advisors (not brokers)

 The role of the sell side advisor is paramount, as they will typically help you with exit planning’, the marketing of your business, central deal negotiation, management of potential acquirers, and provide guidance once lawyers become involved in the final stages of due diligence, to ensure the agreed deal is delivered.

Very early on in the process, a sell side advisor will, identify those aspects of the business that require addressing before marketing your business for sale. This could include reviewing customer, supplier and staffing issues, such as contracts or outstanding legal proceedings.

They will also lead the preparation of the sale documentation, such as the Information Memorandum, the prospectus that gives a detailed overview of the business, and which typically informs the basis of a buyer’s valuation.

The question of ‘who could buy us?’ will also be addressed rigorously by the sell side advisor, meaning that all interested parties will be carefully vetted. Whether it is a Private Equity firm, other financial investors, competitors or strategic buyers, the advisor should vet each party thoroughly before inviting them to the table.

At the point at which an offer is received a sell side advisor will help you understand the detail and scope: the overall ‘price’ or Enterprise Value, the structure and how sale monies will be paid out to you. Importantly, they should negotiate hard on your behalf, inviting multiple interested parties to the table and excluding those that might negatively impact you.

Ultimately, the sell side advisor should represent your best interests throughout the sale, by delivering a maximised valuation with terms that suit your post-sale plans.

NOTE: Avoid ‘brokers’ that simply place your company for sale online but give little/no input on preparing for sale and during offer negotiations – the stages that matter most. You should keep in mind the adage you get what you pay for, especially when you are essentially selling your life’s work.

Financial Analysts

Analysts have a key role to play in preparing the business for sale, especially when buyer scrutiny is a factor. Typically they will engage a financial analysis, to accurately document the performance of the business at a level that statutory accounts simply won’t convey.

Their depth of review of the company adds confidence to any sale process, for example, by demonstrating cash flow, quantifying surplus cash and highlighting historic trends in revenue and profitability.

Financial Analysts should produce a forward-looking performance plan that documents revenue, gross profit and net profit over the medium-term horizon (typically three years). This provides a strong/persuasive argument for any buyer that is reviewing the performance of the business and should give ample data for valuation purposes.

Crucially, they also distil years of operational data into concise, relevant insights: market share, customer churn, and similar metrics. When profitability is assessed for sale purposes, analysts will formulate EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortisation) by applying appropriate “add-backs.” This normalised figure becomes the foundation on which an acquirer can form a realistic offer.

NOTE: Analysts will not only perform a detailed review of the financial performance of the business, they will also assist with addressing the detailed questions that arise during offer negotiations/commercial due diligence.

Leading Law Firm Collyer Bristow – Trusted Partner of EvolutionCBS comment:  

When selecting a lawyer, it is important to retain a firm with a solid track record of completing M&A deals. Selecting a firm with a team inexperienced in M&A work could prove costly, as these transactions are intensive projects where the buyer’s advisors can exploit the absence of specialised and prompt advice.

Experienced lawyers add value at multiple points and are necessary for various stages of the sale process. At the beginning of the sale process lawyers can address any tricky issues identified by your sell side advisor, such as reviewing key client contracts, resolving employee disputes or simplifying your business structure.

Once an acceptable offer is received, an experienced lawyer will get involved with the review/drafting of Heads of Terms, which set out the key terms of the buyer’s offer along with the anticipated timeframe to complete the sale. Heads of Terms should clearly define how much the buyer will be paying and whether any elements will be contingent/deferred, along with other matters, such as the duration and scope of any restrictions on your post-sale activities.

Due Diligence truly tests the determination of vendors, sell side advisors and M&A lawyers. Once due diligence is underway, lawyers will support you in addressing the enquiries and issues raised by the buyer’s legal team. Alongside this, your lawyers will often assist with the preparation and management of a secure data room, which will provide the buyer and their advisors access to key business documents, such as corporate and accounting records, customer and supplier contracts and employment information.

Importantly, your lawyers will advise you on the Share Purchase Agreement (SPA), which legally documents the transaction. This is often a lengthy and complex document, where specialist advisors can ensure that your interests are protected, and you understand exactly what you are agreeing to.

Depending on the structure of the buyer’s offer, other documents will certainly be required, and an experienced lawyer will be able to prepare and advise you on everything required to ensure a successful sale.

For the vendors, your lawyer, alongside your M&A Adviser, become your white knights, protecting your best interests in the deal, and tackling tricky issues on a point-by-point basis.

Wealth Managers Cazenove Capital – Trusted Parter of EvolutionCBS comment:

Wealth Management advisors can help with short-term financial security/liquidity, medium-term lifestyle needs and longer-term legacy planning.

Cazenove Capital will invest money into separate strategies: A short-term cash pot (for tax and ongoing living expenses), a central investment pot (as a source of regular income) and a longer-term legacy pot.

In the short term a key concern post business sale is ensuring security and tax efficiency of cash received; this should be the number one priority post sale whilst a longer-term plan can be formed.

In the medium-term investing money in funds and stocks and bonds will provide a higher real return than liquid cash due to market growth, tax efficiency and protection against inflation.

In the longer term Cazenove can create a legacy investment strategy for long term goals such as inter-generational wealth transfer, trusts, foundations, philanthropy or charitable giving.

Ultimately inflation, along with poor tax planning, remains the biggest long-term threat to the real value of your assets.

As the wealth management division of Schroders, Cazenove Capital are highly experienced with over £100bn of global wealth assets under management. We have presence in the Americas, EMEA, Asia Pacific, UK & Channel Islands. Cazenove focuses on a long-term view and a comprehensive approach, combining portfolio management, banking, wealth planning and treasury services.

Cazenove have an ongoing relationship with their clients, which includes regular review meetings to assess asset allocation, altering circumstances and any change to objectives.

Conclusion

The right advisory team will manage all aspects, preparing the business for market, identifying issues to fix beforehand, drafting sale documentation (such as, the Information Memorandum), identifying/vetting potential buyers, and negotiating deal terms. So, choose who you want to represent you carefully, when it comes to selling your life’s work.

A prudently assembled team of professional advisors and technical specialists will deliver an orderly sale process, stress-free and protecting your best interests. Ultimately, they will ensure you achieve maximum value for your business. To quote the medieval proverb, “many hands make light work”.

Rob Watson, a solicitor specialising in M&A work at Collyer Bristow LLP agrees, noting that “a good team will work closely with you to help manage the competing drivers of running your business and successfully selling it. Selling your business is very stressful at the best of times, but making a good choice of advisor at the outset can ensure that at all times you feel listened to, supported and able to make informed decisions about the sale of your business”.

Thinking about selling in the next few years?

Join our exclusive masterclass, **Pole Position: Preparing Your Business for Sale**, and discover what buyers are really looking for, how to maximise value, and the steps you can take now to improve your outcome when the time comes.

Learn more and book your place HERE

At EvolutionCBS, we work closely with owner-managed businesses to help them understand how the market may view their business today, where value can potentially be strengthened, and how future strategic options may evolve over time.

Whether a shareholder is considering a sale in the short term or simply beginning to think more strategically about the future, early preparation can have a significant impact on long-term outcomes.

To discuss valuation, readiness or future strategic planning in confidence, please contact us.