Appointing advisors for your sale

When looking to sell your business, selecting the right professional advisers is essential to a smooth sale at the maximum price. The key professional will be the financial adviser and making the right choice will massively influence the successful sale, benefiting you by offering:

A much wider knowledge and ability to trawl for purchasers.
Many years’ experience of dealing and negotiating with purchasers.
The ability to make confidential approaches.
The intermediary can take a tough stance – protecting the ‘warm relationship’ between buyer and seller, who may decide to work together post-sale during an ‘earn-out’ period.
Providing the right advice on the commercial and tax issues of the deal structure.
A good financial adviser should be able to add value to the sale many times more than the fees charged.

The role of the financial adviser

The financial adviser can fulfil a number of key roles:

Help groom the company for sale.
Advise on the timing of the sale.
Advise on the value of the business and how to maximise the sale price.
Ensure that the Information Memorandum is highly professional and enticing to a purchaser – a competent advisor will also include key deal issues in this document, which can be addressed at this early stage in order to smoothly progress later negotiations.
Identify and approach a wide range of potential purchasers.
Ensure proper preparation prior to meeting purchasers and then lead the negotiations.
Elicit indicative offers and advise on these – research the quality of the bidder and ensure that the deal is structured in the most beneficial way to the seller.
Advise on tax consequences – a vital service which most company sales advisors are not able to offer their clients.
Prepare Heads of Terms – many advisers leave this to the lawyers, which is normally a more costly route.
Co-ordinate the due diligence and legal work.
Finally, take the client past the winning post to completion!

Types of adviser

It is easy to make a mistake in choosing a financial adviser and, depending partly on the size of your business, there are a number of options:

Investment Banks – these tend to focus on the big deals.
The big accountancy firms – these can offer a broad package including taxation, accounting services, vendor due diligence and so on.

Specialist M&A firms. These tend to fall into two categories:
1. The ‘estate agents’, who usually take a very limited marketing approach and who put businesses up for sale at an ‘asking price’ – a starting point negotiations will only go down from.

2. Specialist M&A professionals. These fall into two sub-types: those offering a sale only service and those offering a comprehensive package.

We would strongly recommend that owners select advisors who are able to provide a comprehensive package to help them through the whole process.

Tips for choosing a financial adviser

There are a number of things to keep in mind when making the all-important financial advisory appointment:

Be a big fish! Make sure that you are important to the adviser.
Carry out a ‘beauty parade’ of two or three advisers.
Gain confidence from verifiable previous transactions.
Meet the whole team that will be looking after you and make sure you feel comfortable with them.
Ensure that their valuation is ambitious but most importantly, realistic and achievable.
Do not be pressured into an immediate sale.
Understand the fee structure but keep in mind that achieving maximum value for the sale and post-tax proceeds are the main factors to consider.

The other advisers

If you are contemplating a sale then it is essential that you consider the adequacy of your existing advisers.

Looking at the key areas in turn:

Legal advice

The old ‘family retainer’ may be good for conveyancing, wills and employment issues but specialist skills are required to deal with a company sale. A good lawyer with commercial flair can add significant value to a transaction and you should consider at an early stage whether your existing legal adviser has the right skills. Points to bear in mind are:

Does the firm have specialist M&A experience?
Are the resources and breadth of expertise adequate for your transaction?
Does the firm have adequate indemnity cover for your size of transaction?
Conduct a beauty parade of two or three firms – feel comfortable that you will be able to create a strong personal relationship with this key adviser.
Ensure that you get a fee estimate up-front.

For clients who don’t have an appropriate legal contact, we can introduce you to our panel of recommended law firms. Whether large or small, provincial or London based, they are highly experienced in company sale transactions and have worked with the CH team on countless satisfactory deals.

Auditors/Accountants

Your business, and the auditors files, will almost certainly be subject to due diligence so the key question to ask is “would the auditors’ files pass the test?”

Even if there are some reservations over this question, many owners are tempted to use their existing accountants and auditors because of the relationship and the knowledge they have built on the business, perhaps over a number of years. However, the key consideration should always be to appoint advisers who will be able to do the best to maximise the value of the sale.

Tax adviser

It may be that your own auditors/accountants are on the ball, but if not, you need to consider appointing a specialist adviser who has wide experience of advising owners selling their businesses. A vital aspect of the deal value is not just the purchase price achieved but the net amount that the seller gets to keep after paying taxes on the proceeds.

The majority of firms offering a financial advisory service do not provide tax support for the seller. A small minority, include this in a full support package, as we do at Clarkson Hyde.

Other advisers
Depending upon the company’s circumstances, you may need to review other advisers such as IFA’s (are all matters such as directors’ and staff pensions satisfactory and up to date?), property advisers (are your current advisers properly equipped to deal with matters arising from a sale?) and so on.

The sale process can be quite stressful so it is important to ensure at an early stage that you have the right team of advisers, both old and new, to support you from start to finish. Not only this but it will assist greatly if you can meet with all of the key advisors face to face, preferably at your premises, so they can gain a proper understanding of your business and therefore provide the very best advice on the transaction.