Q: What is the best way to sell or acquire a business?
The most important piece of advice for any adviser considering leaving the industry, or acquiring a business, is to give yourself time.
Two to three years is the very minimum you need, from setting the wheels in motion to actually exiting the industry. Similarly, acquiring a business is not an impulse buy: making the right choices needs plenty of consideration and due diligence.
To assist firms considering buying or selling, we usually recommend a six-stage process:
• Stage 1: Preparation.
Buyers want businesses that can easily be transitioned. A good customer relationship management system with exportable functionality is essential, and companies that have segmented their client bank and introduced a centralised advice proposition within their business are even more attractive.
• Stage 2: Ideal successor.
Having a clear picture of your ideal buyer is key to selling any business.
Most companies want a mirror of themselves and, while no business is the same, giving yourself plenty of time to identify the closest match possible is vital.
• Stage 3: Agreement in principle.
Once the parties have met and established that a sale would be a positive outcome, an agreement in principle should be agreed. Of course, there will be a period of negotiation, but it is always better to start negotiations once the first draft of heads of terms has been created.
• Stage 4: Know what you are buying.
With any acquisition, we strongly recommend the buyer instructs a due diligence audit on the target company.
While initial discussions will create a good understanding of their business operation, there is no substitute for a focused and thorough audit. This process – and the clarity it creates – will be beneficial for both parties.
• Stage 5: Technical support.
It is important you have the right technical support to get all the answers you need, whether buying or selling a business.
Some of the areas you may need assistance with include GDPR, entrepreneurs’ relief and Financial Conduct Authority notification. The right support can make the deal work effectively and compliantly.
• Stage 6: Deal completion.
When you reach the final stages of the deal, a solicitor will be needed to fulfil several functions. The creation of the share purchase agreement is one, but you will also need to ensure the change in shareholders is notified to Companies House.
There are many things to consider when making your exit from the industry.
Time will not help you make all the big choices that lie ahead, but it will allow you adequate breathing space to ensure you feel comfortable with some of the biggest professional decisions you will ever make.
Neil Stevens is joint chief executive of SimplyBiz Group