Business sale preparation tips: Insights from our Corporate Partner

Management teams, record keeping and finding advisers – Jacksons partner gives his business sale preparation tips

Insider Media recently published an interview with our head of corporate and commercial, Daniel Flounders, exploring how business owners can prepare for a future sale and avoid common pitfalls. Drawing on his extensive experience advising entrepreneurs across the North East, Daniel shared practical insights on management teams, record keeping and choosing the right advisers – guidance that can make the sales process significantly more streamlined.

Daniel Flounders has experience across a variety of transactions including mergers, acquisitions, disposals, management buy-outs and buy-ins.

He said many entrepreneurs don’t consider selling until they receive an offer: “It’s quite refreshing when somebody decides they want to gear their business up for sale, so when the time comes, the process is as streamlined as possible.”

Flounders admitted that selling your company can be intense, especially when it comes to due diligence. Ensuring all of your record keeping is up to date will save you a lot of strain down the line.

“If you don’t have your records in place it will be a real nightmare when you’re searching around for years and years of trading history and then have to accumulate that into some form of database,” he added.

The lawyer advises that you have up to date contracts with all customers. “If a contract is based upon terms decided ten years ago, it’s hard to ask the buyer to pay full value for that,” he said.

Contracts of employment are also important, and it’s essential that bonus schemes are properly documented.

“We hate those scenarios where something has been done on a handshake 15 years ago,” said Flounders. “You should be able to say – here is our customer list, these are all of the trading arrangements we’ve had with them, this is how many products we’ve sold to them, these are the rebate terms and the notice provision terms.”

When it comes to pulling together a deal team, Flounders believes it’s important to form relationships with advisers beforehand. This will give the adviser context and understanding of the company, and its goals, ensuring a more simple process when it comes to the point of discussing a sale. “I think the added value you can bring in is better at an early stage, rather than being rolled in at the 11th hour.”

Flounders suggested having three or four key advisers, including lawyers, a relationship manager at a bank, an accountant and tax professionals: “To me, that lead in time is really because you will get a lot of advice, particularly from your accountant or tax adviser. That ultimately means you’ll end up with more money in your pocket at the end.”

In some cases, choosing advisers is more reactive, and Flounders believes that long term relationships are not the “be all and end all”. He said: “Sometimes somebody will come to us because they’ve had an approach that seems too good to be true, so they will proceed with it.” He noted that, in any case, it’s important to choose an adviser with a solid reputation locally, and somebody who has experience in the type of transaction you are looking at.

“A bigger transaction, where you are selling to a private equity house or to a business backed by a private equity house, will be different in nature to an acquisition, he added.

One way to take pressure off a business owner during a sale is by having a strong management team.

“When a business has grown really quickly, they will have a managing director who is also HR director, finance director and health and safety director,” said Flounders. “A senior management team is key, because it enables shareholders to not be burdened by the sales process.”

Preparing for a sale doesn’t have to be overwhelming. Contact our Corporate and Commercial team for tailored guidance on getting your business ready for the next step.