Corporate partner Clare Lang is giving some new year advice to business owners who are looking to sell their business and retire in style. Clare, a legal advisor to many SMEs and PLCs, covers the key boxes business owners must tick and understand when preparing for an acquisition.
Many business owners dream of starting a comfortable and relaxing retirement by achieving a lucrative exit from their business, whether through a straight trade sale or a management buyout.
As a corporate lawyer who has specialised over the past 17 years in trade sales, acquisitions and management buyouts, I wanted to briefly share my top tips for achieving a successful, hassle-free business sale.
Preparation: It’s vital to start planning and preparing between two and five years ahead. Maximisation of value can take time and effort so start considering the key hurdles, your end goal, and involve your advisers early.
Advisers: Choose your advisors carefully and go on a personal recommendation from someone you trust. Don't be taken in by flashy marketing and beware of contractual tie-ins. Also get a tax planning expert in as early as possible – it can result in significant savings!
Management: An area too many people overlook. Whether it's a trade sale or a management buyout, it pays to have a capable management team in place who have little or no reliance on you. Too much reliance on you, where you intend to exit the business, will inevitably rattle a third-party buyer who doesn't have its own management team to parachute in. When it comes to a management buyout, a management team that doesn’t know enough about the business, and is not perceived to be sufficiently capable to run it without your involvement, is likely to concern any funder.
Business risk: Do what you can to minimise business risk. Avoid high customer or supplier concentration and secure long-term supply contracts, with no change of control provisions.
Your people: Ensure key employees are on employment contracts with reasonable notice periods and enforceable non-compete restrictions.
Assets: Make sure you can demonstrate a clear ownership of assets. Any assets which aren't in the right place should be transferred into the company for sale, subject to financial and legal advice.
Property: If the business lets its property, make sure you have long-term, transferable leases in place.
Outstanding legal issues: And finally, make sure you settle any pending litigation, employee issues or law breaches. These types of issues, if not resolved, can inevitably lead to delays and could create concern for a buyer.
These points are just an overview of the key issues business owners must be aware of. However, if you are considering the sale of your business, mfg Solicitors offer a free of charge, no-obligation pre-sale review. If you’re interested in a further discussion please call me on 01562 516132, or email clare.lang@mfgsolicitors.com
Clare Lang is a partner in the corporate team at mfg Solicitors. Based at our Kidderminster headquarters, and alongside partners Stephen Wyer and James Hayes, Clare focuses on growing our corporate client base, advising clients across the region on mergers and acquisitions, business disposals, management buy outs, reorganisations, and a series of business-related finance matters.
A regular speaker and media commentator on corporate law issues, Clare is also one of five presenters at a Business Breakfast Seminar which is being held on Tuesday 19 March at Hagley Hall in Worcestershire. The event is free to attend and people can book by emailing elizabeth.armstrong@mfgsolicitors.com
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