Corporate FinanceBusiness Disposal Webinar

Wednesday 11th March 2015

About usLorna Watson

Director

Corporate Finance / Tax Support

Peter O’ConnellHead of Corporate Finance

Today’s webinar: what will we cover

Why Sell

Retirement – no succession in the business

Ill health

Release cash – Other priorities

Toughening market

Opportunistic (unexpected offer made)

Consolidation of the business (e.g. non core activity

being sold)

Valuation

Definition

The value of a business is the price at which a business will

be sold by a willing purchaser to a willing buyer

Understanding how people value businesses is key

Price Earnings multiple most common

Can use Discounted Cash Flow or Net Assets

Preparing your business for sale

Commercial Maximising Profit / EBITDA

Maximising Multiple

Eliminate non core activities

Legal & Financial due diligence

Tax Corporation tax

PAYE & National Insurance

VAT

Maximising Value: Vendor Actions

Remove risk – deal with legal issues

Customer contracts

Supplier contracts

Tidy up employee issues

Ensure employment contacts in place

Can the business survive without you?

Management team

Intellectual property up to date

Maximising Value: Advisor Actions

Market the business for sale

Create competitive tension during sale process

Surplus cash – how to deal with

The Process (part 1)

Buyer Research

Prepare Sales Memorandum

Finalise ‘A’ list of potential acquirers

Prepare a brief summary of the opportunity

ADDING VALUE

Understanding the target market and value drivers for potential acquirers

Packaging the opportunity

Focussed and targeted approach to potential acquirers

Ensure potential buyers understand the opportunity with minimal input

TIM

E

Approach buyers and sign up interested parties

Establish a market and test our audience before compromising confidentiality

The Process (part 2)

Despatch Sales memorandum and control the bid process

Review indicative offers and shortlist a select number of

bidders to access the date room

Review final offers and choose preferred bidder.

Enter exclusivity

Assist in the preparation and delivery of management

presentations

ADDING VALUE

Ensure vendor control to maximise competitive tension

Assist in understanding, evaluating and maximising offers

Select the right buyer

Ensure potential acquirers have sufficient understanding to present a firm final offer

TIM

E

Support legal, financial and commercial negotiations as necessary to a successful

completion

Drive and control the process to a successful completion

The Process (part 3)

Post Completion

ADDING VALUE

• Assist with post completion matters including:

• Completion accounts

• Earn-out determination

• Taxation issues

• Warranty issuesTIM

E

Identifying Potential Purchasers

• NOT Brokers or Business Transfer Agents

• Direct approaches to decision makers, not scattergun approach

• Own research using professional search tools and software

• Leverage professional network of lawyers, accountants etc.

• Contacts within VC / Private Equity community

• Database of MBI candidate and HNWI’s

• Suggestions from owners

Management buy out / in

Potential option if trade sale is not available

Enables you to reward management team for working in the

business to date

Funding is always an area of concern

Potentially look for equity investment for this option

Often sale at a discount compared to trade sale making the latter

more attractive

Taxation considerations

Sale of shares or assets?

Entrepreneur’s relief (ER) – 1st £10 million at 10% rate of

Capital Gains Tax

Qualifying rules for ER

Surplus cash – is it an issue?

Deferred consideration & earnouts

Employment related securities

Timescales

TIMESCALE

Planning Stage(Teaser, IM, Research)

4-6 weeks

Marketing Stage(Approaches, discussions, meetings, offers)

3-6 months

Completion Stage(HOT’s, DD & legals)

4-6 weeks

The Documents

Confidential 1 page summary

Information Memorandum

Non Disclosure Agreement / confidentiality agreement

Heads of Terms / Heads of Agreement

Sale Agreement

Warranties

Tax Covenant

Restrictive covenants

Why us?

High quality advice available locally

Genuine investment in understanding the business, its key attributes

and the market drivers

Creative solutions

Joined up tax and corporate finance advice

Experience

Commercial input into legal documentation

Highly proactive project management to drive the transaction

through to completion

Recent deals

Conclusion

Prepare the business for sale

Plan the process properly

Get the timing right

Be aware of tax issues

Ensure the structure is set up correctly

Ask us a question

Thank you for attending

We will send you a link to the recorded session

Business Disposals Webinar

Wednesday 11th March 2015