Key steps to consider when preparing to sell your business
For those considering selling their business, being ‘exit ready’ will help their firm create a good impression for any prospective buyer or investor, minimising the risk of value erosion, price chips or at worst, a deal falling over. Above all, it comes back to the old cliché – ‘failing to prepare is preparing to fail’.
Organising financial information in good order
Key steps to consider include:
As a starting point, potential purchasers will look for the level of income generated by the business over the last few years. It may also be useful to provide a realistic and detailed projection of future sales. Good quality, up to date financials allows a buyer to accurately value the business.
Arranging audits of key areas of the business, including data protection
Personal data can be one of a company’s most valuable assets, so ensuring it is being treated in accordance with data protection legislation will prevent attempts at price reductions from a buyer.
Ensuring ownership of all assets is contained within the correct entity
The assets used in the business may be owned by separate entities. It is important to be clear upfront about the business model and if necessary transfer any assets (particularly IP) required for the business into the correct entity pre-sale.
Updating key business information into electronic format, with all relevant supporting documents, ready for upload to a dataroom
If businesses have been running for some time, it is easy to forget that systems and procedures may be a little outdated. Making sure all documents are in readily accessible electronic format early on will limit any delays later down the line.
Checking if trading terms are documented, signed and in date
It may seem self-explanatory, but the basic details of making sure core documents are organised and accurate is often overlooked – attention to the smaller details will always instil confidence in potential buyers.
Giving thought to what the next stage of the business looks like post sale
Some business owners may want to make a ‘clean break’, while others continue to be involved with the business after the sale – it is important to plan what will be realistic and needed in the eyes of the new business owner. Clarify who will be involved and on what terms to ensure a smooth handover.
As one of the most significant transactions that could be undertaken - don’t go it alone. To proactively identify and resolve any issues before they may impact on a deal, Shoosmiths has harnessed its extensive experience guiding businesses through their corporate lifecycles into one innovative product. Shoosmiths’ Readiness is a simple online tool, designed specifically to protect the value of a business whilst helping it prepare for an invasive legal due diligence process in connection with a potential sale, investment or re-financing – all starting with one easy to use questionnaire.
Nina Smith is a corporate partner at Shoosmiths and specialises in advising mid-market businesses across a spectrum of corporate transactions, including sales, private equity investments and acquisitions.
To find out more visit www.shoosmiths.co.uk/expertise/connectedservices/readiness or get in touch directly with Corporate Partner Nina Smith at [email protected]
