Key Stages in the Business Sale Process – Stage 6 – Getting to Completion (Part 2)

An article by Peter Watson, Prism Corporate Broking

The actions necessary for getting a business ready for sale depend upon the business in question, but getting an external perspective is crucial to identifying the areas of value, and also of risk to potential acquirers.

The following will almost always be relevant:

Core documents/Contracts – do you have up-to-date employment contracts for all staff; are supplier and customer contracts up-to-date; collate licence and lease agreements, proof of IP ownership etc.  In all these instances you should familiarise yourself with documents and draw any significant clauses to the attention of your broker.  All these will be pored over by the buyer’s lawyers during due diligence – they will pick up on anything unfavourable.  It is far better to get such things out in the open at an early stage so they cannot be used as justification for chipping the price later on.

Skeletons in the cupboard – clearly any on-going legal disputes will need to be declared, but it will always be preferable to settle these in advance where possible.  Also under this heading one should consider any potential skeletons such as planning anomalies or environmental liabilities.  Always take appropriate professional advice in advance of the sale.

Information – it goes without saying that a buyer is going to want to see detailed management information, therefore it is essential that this is maintained in a timely and accurate manner.  You will also be asked for analyses of your data in a number of ways (eg. splits by customer, product, market etc.) so prepare accordingly.  Sellers who can provide such information quickly and accurately invariably create a good impression.  Those that can’t or don’t engender a perception of greater risk to the buyer.

Involvement – carefully consider who else in your business needs to know/be involved and at what point.  Whilst we generally advocate not telling staff until the deal is done, that is not always practical or appropriate.  You may well need to involve some other staff, especially during the due diligence process.

None of the above can be changed in the very short term.  These issues need to be addressed well in advance of a sale process. Perhaps there is an opportunity for a Prism Options Review.