Whether or not to sell your family and owner managed business and when to sell are among the most important decisions that you may have to face as the owner of such a business. Deciding when to sell, and how to sell, either by way of a sale of the shares or a sale of the assets in the company, will depend on a number of internal factors as well as external market considerations which can often dictate the timing of the decision. It is important to remember that work on preparing your family business for sale should start several years in advance to ensure that the company / business is ready for sale, and you achieve maximum value on your exit. You should undertake a thorough review of the entire business and consider your personal wealth position and what you need as a result of the exit. Such considerations may include staying on in a consultancy role post-completion to aid the transition of the business.
Planning and Timescales - Sound planning and preparation is key to a successful family and owner managed business sale, and this can be a complex exercise. The time it takes to sell any business will depend on a number of factors, including the size and type of business and market demand and whether the buyer wishes to purchase the shares and all facets of the company, or just cherry-pick the desired assets. On average it can take between six and nine months to sell any business, but, in extreme examples, it can take several years. There will be various stages to the transaction including preparing the company for a sale, tax planning, valuing and marketing the business, negotiating price and other terms (such as seller warranties and indemnities), performing due diligence and closing the transaction.
Professional Advice – Seeking the correct professional advice from lawyers, accountants, corporate finance experts and financial advisors will be vital to the success of the sale of your business. The earlier you take advice from your advisors the smoother the process will be whilst at the same time allowing you to achieve the maximum value for your business. Discussing financial planning and investment management options with a wealth manager should be seriously considered to ensure that you have a plan for the future once the sale of your family business is complete.
Key People – Where there are key people to the business other than yourself, make sure they are happy and properly incentivised. Make sure all employees have fully completed written contracts of employment containing enforceable restrictive covenants. Ensure that any employment disputes have been or are being resolved. Furthermore, consider when will be the most appropriate time to inform employees of the potential sale.
Finances/Accounts – Through working with your accountants, ensure that the business accounts and financial information is accurate and up-to-date as any buyer will scrutinise such information which will heavily influence how valuations for your business are formulated.
Key Contracts – You will need to review all contracts with any key customers, clients, suppliers, and/or distributors and make sure the terms of each contract are clear and disclosable to the buyer. In addition, make sure that you understand any obligations on you or your business in light of the proposed sale. More often than not, uncertainty over these areas can lead to delays in the sale process.
Records – Finally, it is important that all documentation and information about every aspect of your business is in an orderly and complete fashion. Ensuring that your business statutory books and the company record at Companies House is up-to-date will help the sale process run smoothly. Any buyer will carry out a thorough due diligence process and it is in everyone’s interest for all of the information and documentation about the business to be accurate and readily and easily accessible. Ashfords can provide access to an electronic data room to ensure easy access to all relevant documentation.
Further information on succession planning and selling a family and owner managed business can be found on the Institute for Family Business website.