Preparing to sell your company can make you more money **now**

Helping business owners get Exit ready

As a business owner, having a well thought out exit plan can be the difference between a good exit and a great one when the time comes to sell. A well-planned exit strategy will help you to maximise the value of your business. It is also the case that much of what you can do to prepare your business for the best sale possible is good practice for smooth day to day management and prevention of legal and financial issues throughout.

For most business owners selling your business will be a once in a lifetime, life-changing event and one that you should plan for carefully.

Timing your exit

Theoretically, the ideal time to sell a business is when the markets the business operates in, the financial performance of the business and the personal circumstances of the owner are all in the best shape. However, predicting when all of these elements are aligned is extremely difficult and one might just think that the time is right when the time is right, so how does one prepare for this?

Looking inwards, it is also when you have your systems and documents in good shape so that you can ‘package’ them up and reassure your prospective buyers that they are looking at a healthy, well maintained business with no skeletons in the closet.

For that reason and in order to maximize the business valuation at sale, owners need to invest the time to make the business an attractive asset to prospective buyers and also make exit readiness part of regular business planning.

In a business sale process, buyers and their advisors typically demand significant amounts of in-depth information during due diligence in order to do a thorough evaluation of a business.

Being well-prepared for the sales process helps a seller to increase the efficiency and speed at which the transaction can take place and plays a huge part in its success. It is much more impressive to be able to quickly provide what the buyer is looking for that scrabbling around trying to patch up holes in your operations, perhaps on realising that business done on a handshake won’t satisfy your buyer.

From the start of a process, sellers want buyers to have positive momentum and confidence in what they are buying. Nasty surprises can reduce price, cause problems to fix, delay negotiations and increase the probability of an aborted deal.

Being prepared for Exit well ahead of the sales process shows that a seller is in control of a well-run business.

Documents and Data rooms

An essential part of almost all business sales processes is the due diligence process and use of a Virtual Data Room. Originally these were physical rooms containing thousands of pages of paper and usually located in lawyers’ or companies’ offices. Nowadays they are digital platforms, hosted online, indexed, searchable and designed specifically for the secure storage and sharing of confidential business information.

Preparing for due diligence in advance for the sale of the business can help reduce stress, save time and money if you are able to anticipate and prepare for some of the questions that would be raised during the due diligence process.

Some of the questions that the due diligence process is likely to cover:

•  Financial performance and accounts
• Assets
• Tax
• Disputes
• Intellectual Property
• Employment
• Customer contracts
• Property

Sourcing documents, setting up and then maintaining and updating a Virtual Data Room so that all relevant documents are in digital form requires considerable time, effort and attention to detail. This can be a significant personal undertaking for a business owner who may not wish to delegate the task to curious employees and for a management team whose time is best spent running the business. Here at Tiger Law we can introduce you to Graham Hart of Isagon Associates, an M&A project management specialist who can help you to manage this process, freeing up more of your time to run your business.

Sometimes and especially with larger deals, sellers can be asked to provide many thousands of document pages into Data Rooms and this only increases during the due diligence process as newly disclosed information provided in response to the buyer’s due diligence questions gets added. Checking documents to avoid disclosing particularly sensitive commercial information (especially where the potential Buyer is a competitor) and to remove personal data to comply with data protection regulations also takes up lots of time.

Preparing for exit

It’s never too early to begin preparing for the Exit process. Getting ready well in advance of the start of a sale process gives the seller time to fix problems with important documents that any well-advised Buyer should want to see.

Just like the student preparing for exams at the last minute, “cramming” to get a Data Room set up is a risky strategy. Scrambling in the middle of a due diligence process to find important documents which have mysteriously gone missing can cause the seller embarrassment, unwanted stress and test the confidence of any buyer. Ensuring that all business documents are available for inspection when needed is just good “housekeeping.”

Here at Tiger Law we can provide an indexed due diligence checklist so that all important business documents that a prospective buyer would want to see are gathered and stored securely internally well before the formal sales process begins and can then easily transferred across to the Virtual Data Room to be used when the Sale process formally launches. We want to make this as easy as possible for you!

We can help you to manage this process and help you get ready for exit by asking, “If I were a buyer interested in acquiring this company, what would I be interested in seeing?” - having your supplier, employment, insurance and other documents in place and well-ordered not only protects your business during the years that you are building rather than thinking of selling but it will also springboard any sale that much more easily and speedily.

We can introduce you to an M&A project management specialist Graham Hart of Isagon Associates who will help you to set up and maintain an ongoing due diligence readiness checklist, with an easy to follow RAG (Red, Amber, Green) “traffic lights” system and an action plan with regular reviews so that the status of important business documents is constantly improving. They can also work with you to ensure that you have documented all the core work processes that drive your business (such as operating manuals, technical manuals, training manuals and IT network documents) which will help a prospective buyer to understand how the business operates. Doing so will also help any business brokers or Corporate Finance advisors you hire to describe the business operations more clearly in their Business Sale Prospectus (“Information Memorandum”) they prepare to market the business.

The huge benefit of gearing up for an eventual sale early is that this hard work will all help to streamline and energise your business right now and we know that Isagon’s ethos is very much the same as Tiger’s here.

Picking the Right Legal Team

Finding the right legal team when selling your business is important. Whilst there are many law firms, not all are experienced in selling or buying a business. In M & A deals you need a solicitor that will get a deal over the line, and will be business minded, keeping your priorities at the forefront. This means that the deal dictates progress rather than legal niceties dictating the timetable, so a real partnership with your advisors is really key here.

Choosing the wrong law firm to represent you in a sale can lead to unnecessary delays and incurring legal fees. The legal work associated with sale of a business is a specialist area therefore its vital to find a legal team that can deliver to timescale as the other side without keeping you or the other side waiting.

Giving you all the support you need for a successful deal

Being able to look through all documents early before a Sale process commences means that we and your other advisors are able to anticipate the types of issues that a buyer might raise during due diligence and then work to reduce risks, increase a buyer’s confidence levels and ultimately help you achieve the best price from a would be buyer.

Maintaining a continual state of Exit readiness gives you the owner far greater ability to act quickly when market conditions or other circumstances determine that the time is right to start a Sales process or even to respond to an unexpected approach from a potential Buyer.

And when the sales process starts our team of experienced M&A experts at Tiger Law working together with our M&A project management associates can help you to manage the entire process co-ordinating all of the activities with your other advisors and with the team from the buyer’s side until the deal is completed.