Selling an Unquoted Company Successfully

More and more listed companies are selling non-core subsidiaries and the vast majority of entrepreneurs realise their capital by selling the company. However, very few people receive any training, and most will only sell one business in their career. If you are considering undertaking a sale, you need practical, proven and authoritative guidance on how to cross the commercial, legal, financial and tax minefields safely.

To get the highest price the business needs grooming for sale, known serious buyers must be identified worldwide, the opportunity must be portrayed positively to selected prospective purchasers, the best possible deal must be negotiated and structured tax effectively, and then steered safely to legal completion. Given the current tough marketplace, selling a business or part of a business demands greater skill than ever. This briefing will take you the process step-by-step, ensuring that you avoid the pitfalls and maximise the potential of the sale.

Contents

• Addressing the fundamental issues
  • How attractive or otherwise is the company?
  • Are there obstacles that are likely to delay a sale?
  • Who are the likely buyers?
  • What price range is achievable?
  • When is the best time to sell?
  • What are the alternative exit routes?
  • The sale process
• Groom the business to get the best possible price
  • Budgets and monthly management accounts
  • Sales and profit record
  • Cost reduction and deferral
  • Provisions against profit
  • Undue customer or supplier dependence
  • Management continuity
  • Key staff retention
  • Land or property with development potential
  • Surplus or unwanted assets
  • Surplus cash
  • Taxation
  • Acquisitions
  • Overseas expansion and diversification
  • PR
  • Accounting policies
  • Value add-backs to profit
  • Vendor due diligence
• Be realistic about realisable value
  • Make a robust current year profit forecast
  • Forecast sales, profit and cash flow for the next two years
  • Assess the current value of tangible assets
  • Evaluate surplus assets and cash to be extracted prior to sale
  • Consider any strategic significance or rarity value
  • Quantify cost rationalisation opportunities available for each prospective purchaser
  • Identify any valuation rules of thumb in your sector
  • Apply earnings and EBITDA multiples
  • Utilise a return on investment approach to valuation
  • Use discounted cash flow analysis techniques
  • Value loss-making and break-even companies in a streetwise way
• Select professional advisers
  • Corporate finance advisers
  • Business brokers
  • Legal advisers
  • Accountants to carry out vendor due diligence
  • Tax advisers
  • Pensions advisers
  • Selection meetings with prospective professional advisors
  • Letters of engagement
• Market the company successfully
  • ‘Sweetheart' deals
  • Formal v. covert auction
  • Write an effective Information Memorandum
  • Maximise confidentiality and avoid prostituting the business
  • Find known serious buyers worldwide
  • Never reveal an asking price
  • Make initial meetings work for you
  • Manage the disclosure of unattractive features positively
• Negotiate the deal and sign Heads of Agreement
  • The structure of the deal
  • The form of process consideration
  • Likely legal completion date
  • Other issues raised by purchasers
  • Relevance of written offer
  • Proceeding to signed Heads of Agreement
  • Use win-win negotiation tactics
• Steer the deal safely to legal completion
  • Provide the information required for due diligence
  • Manage the due diligence process
  • Review and negotiate the Share Purchase and Sale Agreement
  • Ensure the disclosure statement limits the effect of warranties
  • Resist price chisels
  • Prepare for internal communication and announcement
  • Prepare for external communication and announcement
• Appendices
  • Typical due diligence information requirement
  • Suggested confidentiality letter