The only time I ever polished my car was just before I took photos of it to sell it online. That was also the only time it got a full detail at the car wash and log-booked service at the mechanic. Why?
The only time I ever polished my car was just before I took photos of it to sell it online. That was also the only time it got a full detail at the car wash and log-booked service at the mechanic. Why? Because I knew it would increase the chances of selling the car in a competitive market. I did what I could to make my car sale-ready.
Selling your business is no different. If your business is polished and has a clean bill of health, you exponentially increase your probabilities of sale and maximise your sale price. Some common things any business should do to make it sale-ready include:
- Ensuring site tenures (leases and licences) have been audited and secure.
- Understanding what secured positions need dealing with.
- Ensuring industrial relations are in a settled state.
- Ensuring plant and equipment are up to date, serviced and safe.
- Completing workplace health and safety audits.
But what about tech businesses that derive value from things you cannot touch, like intellectual property, data, or a complex eco-system of contractual relationships? A tech business has more complex spring-cleaning needs than a standard workshop to get it ready for sale, but the principle remains the same: make your assets attractive and easy to buy. Here are some things you should do prior to populating your data room ready for sale.
First, understand what intellectual property assets your business uses. These will be things like software, business systems, brands, trade marks, trade names, domain names, business names, confidential information, trade secrets, processes and created materials.
Second, understand what rights you have to those assets. If you own your intellectual property assets, show evidence of the registrations. If you licence them, on what terms are they licensed and how stable are those terms? You will need to dust off the licence terms and understand how secure your tenure is to use the relevant intellectual property.
Third, when assessing third-party licensing, identify your key technology stakeholders such as suppliers of business critical systems, outsourced services, software owners and technology infrastructure providers.
Once you have done these three tasks, map it all into a spreadsheet so you can get a clear picture of your asset base and weak points. Buyers will spot those weak points in their due diligence. In my experience, it is better to spot these yourself and either disclose them upfront, or remedy them and make a feature of the new strength.
An easy task is to update (or create) terms of sale and customer-facing policies like privacy statements. Having terms of sale and privacy statements that do not reflect recent law is not only a day-to-day exposure for your business, but an easy target for a buyer during the sales process.
Consider whether your terms and conditions of sale reflect the changes in consumer law brought in by the Competition and Consumer Act 2010 and the major changes to Australian law brought about by the Personal Properties Securities Act 2009. Check whether your privacy statement deals with the updates to the Privacy Act 1988, which saw a revamp of the Australian Privacy Principles to incorporate the National Privacy Principles. Also, don't forget to determine whether your online payment gateways are secure, audited and payment card industry compliant.
Finally, speaking with your advisors and preparing a timeline to marketing will be crucial to obtaining the best price outcome in the relevant market.
While the outlook for your industry, general market conditions and world events are mainly out of your control, your business’s presentability is not. How easy you make your business to buy will impact on how much attention it attracts, and how smooth the due diligence and getting to contract stages will be.
Written by Stuart Clout, a partner in the Sydney office of CBP Lawyers.
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