Key Stages in the Business Sale Process – Stage 6 – Getting to Completion (Part 1)

An article by Peter Watson, Prism Corporate Broking

So you’ve prepared the company well, and done some pre-due diligence.  What can possibly go wrong?

Plenty can and does happen as the process unfurls. One of the first things we tell our clients once they have signed a Heads of Terms is to expect a few emotional ups and downs during the process!

Business is not a static medium and during any deal there are at least two parties whose businesses are continuing to fluctuate throughout the process.

Some issues that have come up in the past include the following:

Loss of a key client (in acquirer or vendor). For some deals this can be a breaker for the acquirer but for most it can be overcome by demonstrating that the loss can be offset by new business or mitigated in some other way. Occasionally the structure of the deal needs to be altered to accommodate the risk. Early identification and clear communication is key.

Board fails to sign off deal It is a condition of most acquirers that final board approval is required. Your advisors should be getting board level awareness and approval at an early stage. As with all sales you need to ensure that you are speaking to the decision makers!

Key manager announces intention to leave Where one individual is key to the success of the business they need to be tied in. Establishing a Share Option scheme can help prevent this type of scenario.

Potential tax liability uncovered As with economists, there are usually at least two alternative legal views on the veracity of any tax claim.  Potential liabilities can be used as a bargaining point late in the process to re-structure a deal. You need to be able to differentiate between real issues and negotiating tactics. Having a good team of advisors is crucially important.