by Grant Kirby | Apr 23, 2014 | Selling a Business |
1. Building the buyers’ confidence in your business is key It is tempting to compare the sale of a business to that of a house, but that is a trap. Walking through a house will give you an immediate impression of all of the key benefits and disadvantages of the house, and if you like it you could be close to making an offer subject to a building inspection. Businesses are quite different; what you see is not always what you get. Businesses can come with hidden liabilities, customers who are about to go elsewhere, staff who have future compensation claims from old injuries, product liability claims, tax liabilities, misleading information on the performance of the business and various threats from technology “game changers” and the entry of global competitors, margin pressure due to commoditisation of the market, changes in customer preferences and more. In order to gain the confidence to pay the “market price” for a business, a buyer needs to be convinced that all is well inside the business and the company vehicle being acquired. It is the vendor’s job to convince the buyer of this. OK, but how do you do that? There are two phases to a sale process: planning for the sale and running the sale and usually the most critical of these is planning. 2. Start planning for the sale several years in advance There are certain things that really build a buyer’s confidence in a business and they nearly all take time to achieve. They are: Audited financial statements for the last 3 years A comparison of performance against budget for the last 3...
by Grant Kirby | Apr 8, 2014 | Buying a Business, Selling a Business |
A key benefit of both the buyer and the seller having their own M&A Advisor (also called Corporate Advisor) is the extra degree of flexibility it provides in resolving differences in the positions between the buyer and seller. For instance, if the buyer and seller come to an impasse, then the advisors would typically discuss between themselves hypothetical solutions that might provide a way forward. These discussions are conducted on the understanding that they are exploratory and do not commit either buyer or seller to the solutions discussed. This then enables the M&A Advisors to be free in proposing solutions and then assessing the pros and cons of each without the fear that they are committing their client in any way. These hypothetical discussions also enable the Advisors to explore their respective client’s responses to the proposed hypothetical solutions and provide a tangible way of the buyer and seller providing detailed feedback on what they do and do not like. This feedback thereby guides the shaping and reshaping of the solutions until an agreed solution is reached. An M&A Advisor will usually not make decisions on behalf of their client, but will negotiate to achieve a result within the authorisations or parameters (e.g. price or terms) provided by their client. Grant Kirby, Director, Cambian Corporate Advisory Pty...
