FINANCE
BY DAVID ELLIS , DIRECTOR , AZETS
Managing the sale of your business
ALTHOUGH EXPERTS NOW PREDICT THE UK WILL NOT ENTER A TECHNICAL RECESSION IN 2023 , LEADERS AT THE HELM OF BUSINESSES OF ALL SIZES MAY STILL NEED TO MAKE SOME DIFFICULT DECISIONS IN THE MONTHS AHEAD . COST WILL BE SCRUTINISED WITH A NEW INTENSITY , SUPPLIERS MAY BE CHANGED , AND ASSETS REFINANCED OR SOLD TO FREE UP CASH FLOW .
So , what should be done to get a business ready for sale ? How might that initial approach happen ? And what ’ s the best way to communicate throughout the process with current employees ?
Getting a business ready for sale
It ’ s important to deal with any potential issues to take any risk out of the transaction , whether that ’ s putting in place the correct legal contracts , reducing debt , or removing some service lines in business that wouldn ' t necessarily be attractive to the preferred type of buyer . This improves the process because it gives the buyer confidence that the seller knows what they are doing , that they run a good business , and that there ' s nothing that ' s going to emerge after the deal that is going to be a problem .
This process is known as ‘ preparing for sale ’; if a business owner is planning on pursuing a sale in the next year , it ’ s advantageous to think about what the business would need to look like to be attractive now . If their business is not well set up , then the transaction is going to take a little bit longer .
When selling a business , it is vital to remain focused on maintaining what made the business an intriguing acquisition in the first place . Many deals fail because the seller puts too much time and attention into the deal , meaning that the core business performance falls , profitability falls , and suddenly they are unattractive to buyers . An agreement of a project plan and having a timeline in place to work towards will help with managing time spent on the day-today and on the deal .
How an initial approach may occur
From a seller ’ s point of view , especially as a small business being acquired by a larger business , the conversation usually starts through an unsolicited approach , in some cases with an offer of a chat over a coffee . The first challenge that most businesses face is distinguishing whether this is a services firm trying to market their services or this is a genuine approach ?
If it is a genuine approach , it ’ s beneficial to have that conversation as it can help point out some of the things that will be attractive to potential buyers of the business .
Communication to staff at acquisition
As the seller , being open about strategy , the reasons for the sale , and general communication with staff is important . This reduces the chances of employees being surprised or losing morale when a deal is completed as they have felt involved in the process .
Top three tips for SMEs heading into the acquisition process :
• Take the leap of faith ; it doesn ' t cost anything to look at the options available and there are people that can support prospective sellers .
• Recognise the reason for pursuing an acquisition ; this helps streamline targets based on what the seller is looking for , whether that is geographical locations , competitors or market share .
• Ensure the business is in good order to allow it to remain successful throughout the process , enabling the seller to take a step back with the knowledge that others are taking care of the business .
Our recent ‘ Time to Buy ’ podcast episode discusses when , how and why acquisitions might become part of your business strategy for growth . You can listen to the episode at www . azets . co . uk / bang-the-drum-podcast .
David Ellis Director , Azets T : 01622 690666 E : david . ellis @ azets . co . uk
Local offices : Ashford : 01233 629 255 / Canterbury : 01227 454 861 Maidstone : 01622 690 666 / Orpington : 01689 827 505 Sandwich : 01304 249 997
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