Whether planning to transfer a business to a family member, selling to a third party, or even just starting the process of working out how to exit the business, engaging experienced advisers will help maximise a business’ value and minimise the risks and uncertainty at every stage of the process.
Some business owners also think that they must be able to do a better job than an external adviser because they are the ones who knew the business inside out and therefore can do the best sales job.
But trying to do it yourself is almost always a false saving.
Specialist transaction advisers have experience in managing the process, minimising problems, and can help bring options and considerations to the table that would otherwise have been missed.
The role of a transaction adviser in advising on the strategy for the sale of the business and negotiating a deal can therefore be critical in ensuring the future value of the business.
Assessing current value
As a first step, transaction advisers will assess the value of the business, taking into account the various structures that can be used to achieve the sale.
To determine the indicative selling price of the business, advisers will consider its key value drivers and a combination of quantitative and qualitative factors.
Another advantage of engaging experienced transaction advisers is the benefit of their extensive network of contacts and the relationships they can draw upon to identify potential buyers.
In many cases when a business owner wishes to exit, selling the business to a family member, business partner or employee is not possible.
Transaction advisers are experienced in identifying potential purchasers, have extensive networks and can introduce buyers to sellers.
International reach can add value, with overseas purchases being very active in recent times.
Maintaining confidentiality around the desire to exit the business, and throughout the sale process, is very important to most business owners.
Advisers can help ensure controls in place over who is aware of the proposed sale and who is provided access to confidential information.
Once a business owner has decided to exit the business, it is important that neither this decision, nor the sale process, distracts them from actually running it.
During due diligence, a transaction adviser will facilitate the process, managing requests for documents and further information, enabling the business owner to retain the focus on the business.
The value of engaging a transaction advisor is particularly apparent during the negotiation and completion stages of the process.
An experienced adviser is able to maximise value at the negotiation stage in ways such as:
- improving the business owner’s negotiating position and minimising disruptions and surprises;
- accelerating closing and facilitating a smooth transition;
- working with management, if required, to accelerate the transaction value in the critical post-deal period.
To ensure the best chance of a successful exit from a business, professional advice should be sought early to ensure the structure of the business, and the transaction, is in the best possible position to maximise the value to the outgoing owner.
Simon James is a partner with HLB Mann Judd.