Matters to be Addressed
A guide on what to do and the likely procedures you will need to adopt.
1. The main reason for sale
- Retirement
- Ill health
- Cash flow difficulties
- An approach
- Matrimonial settlement
- Change of direction
- Create a capital gain
- Non core activity (plc mainly)
- Outgrown owners management ability
- Hassle factor
- Owner not prepared to risk further capital in developing company
- Tax implications for shareholders and directors
2. Type of sale transaction
- Trade sale - Vertical - Horizontal - Competitor - Conglomerate
- MBO, MBI or BIMBO
- Equity market - Fully listed - Unlisted
3. The present market
- Influence of banks and other professions
- Effect of EC regulations
- Contract requirements
4. Matters you need to consider and decisions you need to make
- The genuine reason for sale
- Sale of assets or shares
- Tax implications as a result of sale
- Valuation expectancy
- Method of payment
- Handover
5. What do serious purchasers ideally require
- Company prospectus to include history, activities, staff details, shareholdings, financial summary, product literature, market competition, reason for sale
- Profitable track record in terms of sales and maintainable profits
- Strong ongoing management team
- Good financial controls to include reliable monthly management figures
- Positive cash flow
- Good customer spread
- High margins
- Modern plant
- Brand identity
- Understanding of market competition
- Growth potential
- Good physical appearance
- Genuine reason for sale
- An indication of price expectancy and basis of valuation
- Genuine commitment to sale
- Business plan
6. Factors to be considered in any valuation
- Maintainable profits
- Adjustments for ownership
- Revaluation of assets
- Market multiples
- Goodwill
- Security on balance payments
- Up front sale vis-a-vis package transaction
- Ongoing involvement
- Ratio of goodwill to underlying assets
7. Negotiations
- Modus operandi
8. Contracts
- Due diligence procedures
- Legals
- Warranties
9. Methods of payments
- Cash
- Shares - ordinary, preference, loan stock
- Earn out
10. Tax considerations
- CGT
- Taper relief
- Ex Patria Status
- Roll over relief
