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Richard Tunney, Colin Morgan and Niall Morris from Key Capital discuss preparing a business for sale.
Key questions to consider at the outset
As a business owner considering a sale of your business, ask yourself some key questions which should clarify and prioritise your objectives. Of course, every sale must have a clear financial goal but you will also need to consider the broader picture. The answers to these questions will inform your corporate finance advisor’s sale strategy and the type of buyer that will be best placed to achieve your objectives.
We recommend you ask yourself the following questions;
Why are you considering a sale of your business? Is it because of your financial needs, the capital needs of the business, a lack of succession options, etc?
What are your financial objectives? Is there a minimum amount you need to achieve from a sale to meet your future financial requirements?
Are you seeking to fully exit the business, or do you envisage a continued role and / or a shareholding for yourself post-sale?
What are your hopes for the management team and staff which may include family members, other stakeholders (e.g. customers, suppliers, the local community)?
If you have co-owners, are their objectives aligned with yours? Have you discussed your plans with them?
You may not have the answers to these questions immediately, and objectives can and do change, but as you progress towards a sale you should constantly re-test what it is you are trying to achieve.
"When people start out, it's very much about 'what's the value, what does that mean to me, and what does it mean to my family?' That's important, because ultimately it's a financial transaction, but equally important is thinking about what's going to happen to the business post the transaction and what's going to happen to the team and clients?"Colin Morgan, Group CEO at Key Capital.
In our experience, as business owners get into a sale transaction in more detail, it's often the post transaction factors that become as important as the pounds, shillings and pence, and that's an interesting aspect of M&A that people often don't consider at the start.
Preparing the business for sale
Quality preparation to ensure the company is presented to potential buyers in the best light, increases the probability of a successful outcome.
It’s never too early to start planning and it's not uncommon to start at least two years in advance to consider:
the company’s financial performance and profile,
customer base (e.g.: diversifying with new clients and are you highly reliant on a small number of customers?),
regulatory compliance if relevant to your business, and other critical factors that could impact your business sale down the line.
Importantly, early tax advice should be sought to ensure a sale can be undertaken in the most tax efficient manner.
When you get into the later stages of a transaction, particularly due diligence, it is vital that a clear and concise picture of the business is presented to potential buyers, and preparing for that is always done well before the transaction starts.
Preparing your management information, preparing financial forecasts, ensuring key roles are filled, tidying up the balance sheet (e.g. removing non-core assets such as property investments) and any corporate affairs such as the share register, making sure simple things like employee contracts are signed - these are all key.
“Spending time to sit down and go through 'all the skeletons in the closet', being fully aware of what's happening within the business and that it's presented in a clear and concise format - all of this helps to expedite and de-risk the transaction as you progress through it.”Niall Morris, Corporate Finance at Key Capital.
Engaging an advisor early will help you understand what future buyers want and understand what steps you could be taking now to prepare for a smooth and successful future transaction.
Advice from Irish entrepreneurs on selling a business
Read more from three entrepreneurs who share their reflections on things they wished they had known before going through a sale process: Karen Malone (FCCA), Global CEO and Co-Founder of Centaur Fund Services, James McGann, Co-Founder at Frankie Health, Denise Browne, Co-Founder at Label Craft.
Contact Us:
For further information about how Key Capital Corporate Finance can help you sell your business, please email or call us in confidence.
Email: richard.tunney@keycapital.ie
Phone: +353 1 638 3838