Selling your business: Completing the deal
AN agreement to do a deal can sometimes be a world away from completing the sale of a business.
In an uncertain market environment, maintaining the confidence of buyers through to the completion of the sales process is more important than ever.
“A lot can happen between that initial handshake and actually completing the deal and a great deal of the negotiations will focus on risk allocation and value,” says Debbie Jackson, corporate partner at Walker Morris.
“The key from a seller’s perspective is to be prepared, to address any issues in advance to avoid last minute surprises and ultimately minimise the risk of value reduction.”
A particular challenge is the thorny issue of due diligence and the extent to which a business is prepared to allow access to the books.
“Since you may have courted a number of potential suitors in the disposal process and some of those may be trading competitors, assessing the appropriate level of access to your people, sites and financial information needs careful consideration,” says Matt Henderson, director in transaction services at Deloitte.
Many disposal processes include “vendor-initiated due diligence” where independent accountants prepare a report that will be relied on by the purchaser. In addition to restricting access to confidential information, this process also gives vendors and their advisors the chance to flag up potential issues.
When it comes to the contentious issue of settling on the value of the business, the advice is to ensure that the needs of the buyer are taken into account.
Curtis Wright, who sold kitchen manufacturer Rixonway in 2006, says: “One of the things you’ve got to be careful of is not being too greedy because ultimately whoever buys it is going to want to make some money and perhaps ultimately sell it on. There’s got to be a perception and reality that they are buying that business at a price that is right for you but leaving enough it for the next person to turn a profit and sell it on.”
And when businesses are not properly prepared for sale, deals can go awry very quickly, according to Steve Wainwright, chief executive of Profiled.com.
“We were doing an acquisition, we had heads of terms agreed, we lasted three-quarters of an hour on due diligence because of a yacht and a plane in America that were on the books because we said ‘if this is what we can spot in three quarters of an hour this is not the kind of business we want to buy.”
