Buying and Selling Businesses
Barnes Roffe has specialist knowledge to help our clients through the complex process of buying or selling their business.
Our Partners have many years experience in undertaking these transactions. These are some of the main issues requiring consideration in order to ensure you do the right deal.
Is your business ready to sell?
If you are going to sell your business at some point in the future it makes sense to plan ahead as far as possible. For example, if you hope to retire in five years time, it is never too early to start “grooming” the business for sale. Things to consider include:
- Is the business itself in a good state, i.e. is it profitable and growing, or somewhat in the doldrums?
- How are your compliance procedures? Consider such things as income tax, corporation tax, PAYE and VAT. Are there any untoward issues with may cause the buyer a problem?
- Is there an existing management team in place? If you leave the business what will happen? Will it continue as before, or is it likely to decline? These factors will affect the price that someone is willing to pay you!
- Have you identified any potential purchasers? These may be your customers, suppliers or competitors.
- The state of the economy and your sector in particular can have an effect!
In an ideal world, someone comes along to buy your business and offers you exactly the price you want, pays in cash and you walk off into the sunset! In reality this is never the case.
Apart from the above there are various ways in which a sale might take place:
- A part sale where you retain an interest by an “earn-out” process and may continue to run the business.
- You may just wish to sell some assets such as equipment and intellectual property.
- A management buy-out where some of your senior people raise the capital to buy the business from you.
It is not always possible to receive payment in a single lump sum. The purchaser may well want to pay in instalments, sometimes up to a period over five years! Some payments may be dependent on future profits, in which case you may be asked, or wish, to stay with the business for a certain period of time. This is commonly known as an “earn out”. Payments in instalments can involve some degree of risk, particularly if you are no longer involved in the day to day running of the company. Such arrangements need careful planning and consideration.
How much is your business worth?
There are many ways to value a business. Valuations based on multiples of future earnings or a capitalisation of future cash flows are the most common. A potential buyer may use more than one method to get a range of values for your business, but ultimately the price will be a matter for negotiation. Grooming your business will strengthen your negotiating position.
Prepare a pre-sale memorandum
A pre-sale information memorandum provides potential purchasers with some basic information about the company and its structure. It is the initial marketing document which you will use to attract potential purchasers and is absolutely vital.
Barnes Roffe have vast experience in preparing pre-sale memorandums and also in vetting potential purchasers to see which are serious and which are not!
The next stage is to release more detailed information under a confidentiality agreement to these serious potential buyers. This will lead to the negotiation of “Heads of Terms” and then finally the execution of a sale and purchase agreement.
What happens afterwards?
You need to consider carefully what to do with the money once it is received. Expert advice may help you invest the money wisely and maximise returns. Consideration also needs to be given to longer term issues such as inheritance tax planning and passing wealth on to future generations.
These are just a few of the many issues relating to the sale of a business on which Barnes Roffe can offer excellent advice and guidance.
The process of buying a business to some extent is very similar to that of selling a business but from the other perspective! The purchaser needs to be sure that the claims made and figures supplied by the vendor are fair and accurate.
The due diligence process allows the buyer to review the commercial aspects of the business such as contracts, customers, employees and to confirm that the claims made are correct.
The due diligence process is likely to review:-
- Past performance and projected forecasts
- Financial Statements
- Valuations of any property and other assets
- PAYE, corporation tax, VAT, National Insurance, compliance
- Major customer contracts
Your responsibility to employees
When you buy a business, TUPE rules apply to protect the employment rights of all the employees of that business. You need to be sure that you are made aware of any potential tribunal claims, or complex employment issues that may follow the business and need to be resolved.
Finding a suitable business
Barnes Roffe maintains a large database of businesses for sale. In many cases we will approach potential purchasers/vendors on your behalf anonymously. Our Partners have technical expertise and experience to negotiate a deal which is just right for you.Talk to Barnes Roffe today Barnes Roffe has tried to ensure that the contents and information it provides in its website is accurate at the time of posting. Unfortunately it cannot guarantee the accuracy of contents or information contained in its pages and any person choosing to act on this information should contact a Barnes Roffe partner prior to taking any action