Why would someone want to buy my business?
How many of the following apply to my business?
- We have strong growth prospects
- We operate in a valuable niche sector
- We sell premium goods/services
- We have developed proprietary technology and know-how
- Our business model is scalable in the right hands
- We have sustainable profit margins (which could grow in the right hands)
- We have impressive and motivated second tier management
- The business does not just rely on me
- We have talent in the areas that matter most to the business (e.g. R&D, sector know-how, business development, client fulfilment, sales)
- We have a strong reputation and high profile within our sector
- We have a good spread of quality, growing clients
- We have a good record of generating new business from good, scalable clients
What would put someone off buying my business?
How many of the following apply to my business?
- We are over-reliant on small number of mature clients
- We spend too little time winning and developing new clients
- Our revenues and profit margins have levelled off or fallen
- There are low barriers to entry into our market
- We commonly win new business by undercutting our competitors
- Too much of the business revolves around me, my contacts and my business development skills
- Our business isn’t particularly niche or innovative
- Our market isn’t growing much
- My star employees have little incentive to stay with the business
- My financial information is limited in its depth and scope
Who might want to buy my business?
- The competitor? Some looking for a complementary fit with another player in the sector
- The consolidator? Our market is consolidating and we could add value to
- The buy and build player? We could be a useful bolt-on for a business looking to expand into our market
- The overseas buyer? We could be a good strategic fit for an overseas buyer
- Private equity? Our growth prospects and market position could attract private equity (or even support an AIM IPO)
- The management team? Our strong and ambitious management team might be able to find backing for a buy out
What does my financial data look like?
The first thing any potential buyer will do is scrutinise your financial information.
- Do I have good quality financial information prepared to the right level of detail?
- How reliable and detailed are my monthly management accounts?
- What are our business KPIs? Does my financial information record and measure them?
- Are any of my accounting policies a bit questionable?
Will I be in a position to sell tax-efficiently?
- Will I qualify for Entrepreneur’s Relief? Could my wife/husband?
- How will a sale affect my inheritance tax planning?
- What are the tax implications of not getting all the sale proceeds up front?
- Do I have a share option scheme in place? Is it tax-efficient?
- How do share options work on a sale?
- Will any of my shareholders benefit from EIS or SEIS relief?
- Are any non-employees holding shares?
- If so, do I need to get their shares back?
- If so, do my articles/shareholders’ agreement allow me to do so?
- If so, at what cost?
- Are there any shareholders who might not want to sell?
- What aspects of my business keep me awake at night?
- Are my contracts in writing and accessible?
- Are any of my key agreements on unwritten terms?
- Which of my contracts could be terminated on short notice?
- Have I completed all my intellectual property registrations?
- Is my business data protection compliant?
- Do I have adequate insurance in place?
- Do my employees have up to date employment contracts?
- Do they contain properly drafted and enforceable restrictive covenants?
- Do I have a proper employee handbook and do I keep proper HR records?
- Am I compliant with the latest rules on pension auto-enrolment?
- When did I last carry out an IT audit?
- Do I have an IT disaster recovery plan?
- Am I up to date with my taxes (PAYE, NICs, VAT, corporation tax)
- Does the company own all the assets it needs to operate the business?
- Am I up to date with all our corporate filings?
How will I find a buyer?
- Increasing your public profile can attract interest
- Trade press and websites might feature potential buyers and investors
- Attend some mergers and acquisitions (M&A) seminars and workshops
- Speak to owners who have been through the sale process before
- Get to know some M&A advisers who understand your sector
- If you don’t know any M&A advisers, ask for some recommendations from your accountant, lawyer, bank or business angel network
- Get two or three M&A advisers to talk you through: the sale process; how businesses are commonly valued; different sale strategies
- Don’t sign up an M&A adviser without getting independent advice on their terms of engagement
This is intended to provide a first point of reference for current developments in aspects of the law. It should not be relied on as a substitute for professional advice. If advice on a particular circumstance is required please contact one of the lawyers listed below.
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