Trade Secrets of Business Disposals

Overview

Make your business ‘investor-ready’ for maximum capital return

Most people only get one chance to sell their business and capitalise on years of hard work and planning. Get the deal right and you could become very rich.

Laced with proven tactical advice and guidance, this Briefing will show you how to identify the right buyer and drive the deal to get the best outcome with the minimum of risk.

As the author, Barrie Pearson, states: “This Report distils over 30 years of my deal making, both as a principal and a corporate finance adviser, to reveal the trade secrets people are unaware of because these are simply neither talked nor written about.

The whole Report is laced with proven tactical advice, because tactics determine whether there will be a deal or not. The reality is that tactical mistakes lose deals which should have been won; an unforgivable failure.”

What are the benefits of this report

As a business owner or group executive, you will learn all about:

• How to identify the right buyer – 15 questions to ask if you receive an unsolicited offer
• What buyers really want – and want to avoid
• How to time the deal – get this right and you can’t fail
• The techniques of financial grooming to maximise your company’s value – the 7 key techniques
• How to spot potential deal-breakers at the start
• How to disclose unattractive features positively
• Driving the deal to suit your timetable
• How to get your retaliation in first to avoid last-minute chisellers
• How to achieve the best possible price
• How to steer the deal to success and a maximum return

And you will also discover how to choose and use your professional advisers effectively, their role and benefits, the risks involved and fees.

Who will benefit from this report?

• Managing Directors
• Financial Directors
• In-house legal advisors
• Private practice legal advisors
• Business disposals advisors

Praise for Barrie Pearson

‘The first time we sold a business we didn’t know Barrie Pearson at the time and we didn’t get the best result. The second time around was very different. Barrie’s been there so many times: often he’d come up with an idea or a different slant on things that was invaluable. He must have saved us thousands we would otherwise have paid to lawyers and accountants.’

‘He was a huge help in organising the ‘beauty parade’ and advising on the negotiating process; so often buyers will give a price indication way in excess of their true intention and try to lock you into exclusivity – after which they will gradually seek to reduce the purchase price. Barrie steered us safely round all of that and helped us to drive the negotiations according to the timetable we wanted.’

‘His advice on how to manage the bidders and how to get to the price we wanted was first class.’

Michael McInerney, CEO Brookdale Healthcare, Hertfordshire, successfully sold part of the business, and was advised on the deal by Barrie Pearson.

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Content

1: A Failed Attempt to Sell Will Damage the Business

• Current year performance is likely to suffer
• Customers and staff may be unsettled by a leak
• Owners and key directors may suffer lasting demotivation
• Abortive fees for advisors are costly
• Management may make an opportunistic MBO approach

2 : Realize a Reality Check is Vital

• How strong are buyer appetites in your sector?
• Test your opinion by beauty-parading corporate finance advisers
• Be realistic about likely value and deal structure
• Obtain shareholder agreement at the outset

3: What Buyers Really Want… or Want to Avoid

• Management continuity is often the big issue
• Undue customer or supplier dependence is a concern
• Major customer contracts due for renewal are a threat
• Necessary relocation can be a plus or a minus
• Proven and consistent sales and profit growth
• Forecast sales and profit growth
• Tax and VAT affairs need to be clean

4: Recognise Financial Grooming is Essential to Maximise Saleability and Value

• Annual budgets and monthly management accounts are a must
• Take action to create an attractive sales and profit profile
• Sensible cost reduction and deferral will boost realisable value
• Avoid excessive provisions against profit
• Turn surplus or unwanted assets into cash
• Lay claim to surplus cash at the outset
• Ensure your accounting policies do not understate profit

5: Commercial Features Need Grooming

• Take positive action to retain key staff
• Assess land or property with hidden value
• Diversification and overseas expansion may reduce shareholder value
• Public Relations (PR) may be a double-edged sword
• Separate out and retain a peripheral business
• Challenge the need for vendor due diligence

6: Unsolicited Approaches – Potential Jackpot or Major Distraction?

• Recognise a random mailshot and act accordingly
• A letter from a professional adviser may be a mailshot
• But a phone call is probably serious
• A direct approach from a private equity house should be serious
• An MBO request is a potential minefield
• A direct approach from a strategic buyer might be a jackpot

7: Professional Advisers Need Choosing and Appointing Carefully

• Corporate finance advisers – their role and benefits, the risks, their fees
  
• Corporate finance advisers love inverted fees – so beware
  
• Negotiate corporate finance disbursements
  
• Corporate finance advisers come in different shapes and sizes
  
• Business brokers
  
• Investment banks
  
• Solicitors
• Tax advisers
  
• Create an effective beauty parade
  
• Negotiate letters of engagement

8: Value your Business from the Buyers Standpoint

• Adjusted profits before tax are of the essence
  
• Major cost rationalisation opportunities
  
• Strategic significance or rarity value
  
• Adjust net asset value
  
• Use your adjusted profits to value the business

9: Benefit from Expert Streetwise Tactics

• Timing really is of the essence
  
• Sell the company and your management, not yourself
  
• Outline the structure and type of deal you want
  
• Telegraph any potential deal-breakers at the outset
  
• Disclose unattractive features and events positively
  
• Never reveal your asking price first
  
• Don’t be seduced by private equity houses
• Retaliate first to guard against a last minute price chisel
  
• Sweetheart deals sometimes are really sweet
  
• Use win-win negotiation tactics

10 :Manage the Due Diligence Process Effectively

• Make sure collating the due diligence information does not delay legal completion
  
• Due diligence information to be collated
  
• Presentation of due diligence information
  
• Stick close to investigating accountants

11: Steer the Deal Safely to Legal Completion

• Proceed towards a Heads of Agreement negotiation meeting
  
• A typical Heads of Agreement negotiation agenda
  
• Earn-out deals need defining
  
•  Warranties and indemnities included in the Share Purchase and Sale Agreement
  
• The maximum liability of the vendor
  
• Joint and several liability for vendors
  
• Negotiate the minimum value to trigger a claim
  
• Purchase consideration to be held in escrow
  
• Use your disclosure statement to undermine warranties
  
• Prepare to announce the deal internally and externally

12: Think and Plan your Life after Exit

• Who are you happy to know that you have suddenly become rich?
  
• When will you leave your present company?
  
• How do you intend to avoid boredom and loneliness?
  
• How will your spouse react and cope?
  
• Where do you want to live?
  
• What will you do with your wealth?
  
• What inheritance tax planning should you do?