By Yinka Bolarinwa
Clean up the business — In the months (or even years) before the sale process begins, it is essential to take a long, hard, look at all aspects of the business. In the interests of boosting profitability: Consider whether margins could be lifted; Can non-business expenses be reduced at the expense of long term relationships? Can expenditure with a long term payback, such as advertising, be deferred? Non-business or surplus assets should be disposed of.
Purchasers will not want these so realise some cash and consider paying a pre-sale dividend (this is a standard tax-efficient method of receiving part of the sales proceeds). Look closely at the management structure. A purchaser will not want to have to draft in a new management team if you can demonstrate that your second line management is capable of taking executive decisions. Consider a reorganisation and issue formal job descriptions and titles.
Prepare an excellent 'sales memorandum' — This is often the only piece of information available to the purchaser after the first enquiry and it is the deciding one. Presentation is extremely important. Product literature, charts and tables are much more relevant than pages of management accounts. They may need to be carefully drawn up for the particular purchaser in mind depending on how the business may go and how diverse its offerings are, but bear in mind that the due diligence process will find you out if you are trying to conceal something.
Identify interested parties — The process you have gone through to date may well point the way to the likely buyer profile. If you want cash from a deal it may rule out buyers below a certain size. If you are looking for a friendly purchaser who will safeguard future employment of staff and management there is little point talking to known 'asset strippers'.You may well hold market information about prospective trade buyers, but do not rule out prospective new entrants to the sector.
Keep running the business — You still need to concentrate on this month's sales targets and the usual stress. Consider getting an interim manager to help. A purchaser will appreciate this and take comfort in the knowledge that they can keep them if needed. Also the performance of the business will not suffer. Be prepared for some downward pressure at the end of the negotiations; the cost of due diligence has to be paid somehow!
Staff morale can suffer badly during this period if they are not kept reasonably informed, or offered the chance to buy. Even if you believe in, and practice, the mushroom theory of management, the attitude of your employees will be picked up by the buyer during pre-acquisition contact. No buyer will be particularly keen to take on a demoralised workforce.
Good project management — Keeping control of the events is the role of a professional advisor who is aware of the deadlines and issues. By keeping in line with expectations, goals will be achieved and your business will be sold for the right money and in an acceptable time period. For smaller businesses you may wish to take on this role yourself, in which case, your advisor can brief you. Keep one step ahead and you will achieve your objectives.
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