Are You Thinking Of Selling Your Business?

As the owner manager of a business, which you have spent a lifetime building, the thought of selling it is a very daunting prospect. It is critically important that you get the best possible price for it and that it will ideally continue to trade into the future under control and directorship of new owners. 

A number of key steps need to be taken in order to sell your business, including:

• Valuation of the business.
• How to structure any potential sales deal.
• The best way to advertise the business and which potential buyers should be prioritised as possible purchasers.
• The best time to sell.
• The formality of due diligence and legal matters involved.

While every business sale will be different, typically it takes about six to nine months to complete the process from planning stage to the ultimate sale. Occasionally it can be done in a shorter time period, but it is unusual as a certain amount of preparation work will need to take place in order to get the business into the best possible shape prior to placing it on the market. This article has been prepared in order to give an overview of the process of selling your business. 

Preparation for Sale 

The first stage to be addressed is the preparation of the business for sale. This generally takes a period of four to eight weeks depending on the circumstances of the business. A major part of the preparation stage involves you and your accountants/advisors drafting an Information Memorandum (IM) on the business. Your input as the owner manager to this process is critically important as it sets out a sense of the company and how the sale itself is likely to proceed. 

The IM document should be drafted in a positive way and typically would contain the following sections:

1. Executive Summary
2. Background to the Company
3. The products or services offered together with an outline of the business model in operation
4. Details of the customers and market in which the company participates
5. Future opportunities attached to the business going forward
6. Key financial information and financial forecast, reasonably reflecting how the company is expecting to perform in the next one to three years.

A comprehensive list of possible buyers should be prepared at this stage. This will need to be a combined effort between you and your accountant to ensure that all potential purchasers of the company, both in Ireland and overseas, are identified and graded in terms of their potential.   

Making Contact with Potential Buyers 

At this stage, your advisors will be ready to make contact with potential buyers of the business. Before the IM is issued to the potential buyers for their consideration, they should firstly be asked to sign up to a confidentiality agreement. At this point, your advisors would request that potential buyers, who have expressed an interest, would revert back within three to four weeks providing an indication of any non-binding offers for the business. 

Once the indicative offers are received, you and your advisors will review the offers and a number of the potential buyers will be invited to meet the sales team for discussion purposes. This second stage can take up to four to six weeks. 

Meeting with Bidders and Management Presentations 

At this stage, meetings can take place between interested parties and the sales team (including some of your senior management team, if appropriate.) In many respects, this is a critically important stage in the whole sales process. Face to face meetings with interested parties tend to reveal a great deal in terms of the actual interest level in acquiring your company. In person meetings of this nature can also be very effective in identifying common ground and shared objectives. 

Following these meetings, interested parties would be contacted seeking revised offers, as appropriate. Once revised offers have been received, your advisor interacts with the bidders in order to work out the best final offers. Following this, your advisor will work through the final interested parties and prepare a prioritised list of preferred purchasers. Needless to say, the price on offer will play a very large part in that decision, but other factors may also be relevant. 

Once a preferred party is identified, a Heads of Terms will be prepared. This is a short document capturing the key commercial and financial terms of the proposed deal for the sale of your business. This stage can take between six to eight weeks, involving a significant time commitment from you as the seller of the business.   

Due Diligence and Final Negotiations 

Following completion of the Heads of Terms, the final stage in the sales process will involve a due diligence exercise being undertaken by the preferred party on your business. This will involve a detailed review of all key aspects of the business, so that a full understanding of the detailed operations of the business can be achieved. 

Following satisfactory completion of the due diligence process, the Sale Agreement is prepared by your solicitor, in consultation with your advisor. It is then issued to the selected purchaser for legal review and to sign. Once this document is signed by both parties, the sale proceeds are transferred by the purchaser to you and then the sale of your business will have been completed.   

We have assisted many clients with the successful sale of their business so if you require assistance in relation to preparing your business for sale, we would be happy to assist.