Selling a business

24/08/07 11:51

Selling a business can be one of the most effective ways to achieve an exit. Unlike a flotation there is a good chance that you’ll be able to convert all your assets into cash and in the current seller’s market valuations are high.

FIRST STEPS

Ask yourself how much you want to get for the business and how likely it is that you will achieve your target. Talk to a corporate finance adviser with experience in your type of business. They’ll give you a pretty good idea of what your business is worth in the current market and whether a sale will fulfil your expectations.

FINDING A BUYER

When selling a business, it isn’t usually a good idea to make a public announcement – that just creates uncertainty. Instead, contact potential purchasers discreetly or get a corporate finance adviser to do this for you. This isn’t always necessary. Your business may already be on the radar screens of potential buyers who will approach you about selling. Business owners are always on the look out for acquisition opportunities and your company may be just what they’re looking for.

WHAT YOU NEED TO DO

It is vital that your business is ready to be sold. Yes it may be profitable, but if there are untidy loose ends you run the risk of a deal foundering. So make sure the paperwork is in order – not just the balance sheet but staff and customer contracts. Be upfront with the buyer about potential risks or problems. Honesty in the early stage of a negotiation can prevent the deal falling apart at a later stage.

Think about your own role in the company. If your presence is vital to maintain the trust of customers and suppliers the business may not be saleable if you plan to leave. If you want to make a complete break when you’re selling a business, you must prepare for the succession by putting a solid management team in place while you step back from day-to-day management.

VALUATIONS

Before negotiating, be sure what you want to get out of the deal, and be prepared to walk away. Keep negotiations friendly but formal with an agreed timetable in place to prevent things from dragging on. It’s worth considering talking to more than one buyer when selling. Business valuations rise when there is interest from more than one party.