Who’s that knocking at the door?

17 December 2018

As the year has progressed and market conditions continue to improve on the back of continuing stability in energy prices, despite the uncertainties surrounding Brexit, there is a growing consensus that now is a good time to be selling your business. 

After a period of consolidation, trade players and private equity firms appear undeterred by the macroeconomic events and are now proactively seeking to make strategic acquisitions and investments in support of meeting their objectives.

With fewer business owners wishing to actively market their business for sale this has led to an increase in the number of off market discussions taking place. This market dynamic is an area our firm has been proactively involved as highlighted in acting for the shareholders of Survivex, a market leading training provider to the global energy sector, with their off market approach and subsequent recent successful disposal to 3T Energy Group.

If you are considering taking an approach seriously and willing to sell your business then consideration should be given to the following to assist in achieving maximum value from the process.

Getting the right advice at the right time – it is often the case that potential acquirers will seek to deal with the owner directly, and that despite the best intentions of both parties, the process can be time consuming. Whilst any transaction may provide a business owner the opportunity to meet their own personal objectives and ambitions, it is imperative that any discussions do not detract from the running of the business.

Engaging with experienced and trusted advisers allows business owners to carry on running the business knowing that the sale process is being project managed by people who understand what needs to be done and when, the technical pit falls to avoid and what is commercially acceptable during negotiations. 

Ensure that information provided is accurate – information provided to an interested party regardless of how trivial it may perceived to be, forms part of any acquirer’s appraisal of a target and the offer they table. As any offer will be based on the assumption that information provided being accurate, it is therefore critical that this is the case.

Looking ahead to further in the process when the acquirer undertakes due diligence on the target’s books and records, should the accuracy of the information not be as expected, it could lead to the initial offer being revised downwards.

Getting your house in order and be honest if it isn’t – it is recognised that business owners will often have procedures in place that are fit for purpose for their business and that these are less stringent that larger trade players. However, where there are potential issues, it is important to disclose these to your advisors early, thereby providing the opportunity to proactively assess the impact this may have on the any potential transaction and mitigating exposures where appropriate. 

Do your diligence on the purchaser - before investing considerable time and energy with a chosen purchaser, it is important to gain comfort on their previous track record, position in the market and ability to deliver. Any business owner should seek further clarity on the interested party’s underlying strategic rationale for making an approach to ensure that the purchaser is the right fit for their business.  In addition, emotive factors, such as what will happen to employees, the future ambition of the business and direction under new ownership can be just as important as the price. 

Finally, consider the most efficient tax structure - most purchasers are prepared to be flexible to ensure that the vendor can take advantage of any tax benefits available. Therefore, it is essential to seek specialist tax advice at an early stage during the negotiations to assess the likely tax implications and structure the deal efficiently to minimise potential tax leakage and any associated risks.

For more information please contact Callum Gray (callum.gray@aab.uk) or your usual AAB contact.

To find out more about Callum and the Corporate Finance team, click here.

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