Paul Viner, former finance director of Giraffe, who steered it through the Tesco acquisition, gives his insight into how to prepare your business for sale. What should you look out for? How do you maximise the opportunity? And how do you ensure it goes as smoothly and painlessly as possible?
- Prepare for exit from day one
Many businesses, but particularly those that are private equity backed, know that the end game for their shareholders is to sell the business. Given this, the finance director (FD) in particular, and all of the management team should plan for exit from day one.
In short, this involves getting things organised in many different facets of your business. For the large part, this means ensuring that important business documents (such as property documentation, management accounts and tax correspondence) are maintained on a secure area of the company’s server, ready for the day in which they will be transferred to the on-line data room for the buyer and their advisers to view ahead of finalising a sale.
- Appoint a corporate finance adviser early on the process
Managing the sale process from start to finish requires a corporate finance expert. The common view is to appoint your corporate finance adviser between 18 and 24 months prior to sale. It needs to be someone you like, as you’ll be spending a lot of time with them and probably relying heavily on their counsel.
I recently met a great guy, called Steve Dolton, who has sold five businesses as a member of the management team over the last 20 years – the most recent of which was National Accident Helpline. We both agreed that it’s often the buyer that you least expect who ends up purchasing your business. This is an area where an adviser can add real value, particularly if a buyer approaches you out of the blue when you’re not quite ready for sale. This is exactly what happened with Giraffe and Tesco in 2013.
- Ensure your finance team are of sufficient caliber to execute the transaction
Having an FD capable of managing a sale of a business is a pre-requisite. And having a financial controller who can support the FD in the process, and can
oversee the finance team whilst the FD is out of the business for the best part of three months is vitally important. If there is a weakness in your finance team – deal with it now!
- Be realistic about the commitment needed
A good 30-50% of management’s time in the three months leading up to the sale will be spent managing the sale process and all that it entails. Make sure there are people below you who can run the business and are motivated to run the business. Buyers will not be impressed if the business underperforms in the run up to the sale; significant value erosion or an aborted deal may result.
- Establish strong partnerships with your key advisers
You’ll need to have close contact throughout the sale process with the company’s key advisers – essentially your lawyers, auditors and tax advisers. It’s not advisable to change lawyers or accountants in the year or two before you go to market, so it’s a question of getting your ducks in a row early. Find people you can work with well ahead of the moment when you press the button.
- Prepare for the beauty parade
There are many anecdotes out there of how one particular member of the management team, who wasn’t a natural presenter, ended up saying something completely inappropriate in an investor presentation, blowing an important opportunity to pitch the business to a potential investor.
So, firstly ensure the management team have some degree of presentation skills training; secondly make sure the management team are aligned and any differences of opinion are buried for at least the week of the beauty parade, and thirdly rehearse as many times as you can, because this is your one opportunity to project your business in the most positive way.
- The dataroom and due diligence
The dataroom is usually maintained by the lawyers, ordinarily in conjunction with your FD. Every member of the management team should understand the importance of why ‘disclosure’ of the documentation is necessary. Don’t underestimate the importance of being upfront and honest about all your legal or accounting issues.
- Engage with the other side
My personal style is to engage warmly and fairly openly with the purchaser and their advisers. It’s naïve to think you can get the transaction done with short pointed emails and evasive answers in face-to-face meetings. Trust and honesty is needed from both sides.
- There may be obstacles in your way
Expect the unexpected. Where there are obstacles to jump over lean on your advisers, tap in to their experience – this is why you’re paying them.
- Getting to the finish line…
As you go in to the final month of the process don’t underestimate the effort and time that you’re about to spend in getting all the issues tied up ahead of the ink hitting the completion documents. Enjoy the rollercoaster ride; then take some time out to enjoy the fruits of your years of labour.