BUSINESS BRIEFING The most common feedback we receive from our clients after a deal is that they wholly underestimated the complexity and workload of a transaction. Typically, the perception of a deal is that we identify a buyer, elicit offers, negotiate the best price, and hand matters over to the lawyer to finish things up Complexity and workload successfully completed deal. We also prepare a document that contains all the relevant information a buyer would need in order to make an informed written offer for a business. It is a sales document and aims to create a positive perception of the business, but is also entirely factual and evidenced. There are plenty of well-funded purchasers in the channel at present and demand for the best acquisitions is high, so we currently expect to see a good level of interest which translates into offers and we set a deadline for Buyers to place their bids. Once offers are in, It is a time for both parties to engage personally, This is important to establish trust and a relationship for the months ahead. Other than the written offer, there are soft factors that come into play here in terms of choosing the right party, including cultural fit. In the background we are looking to negotiate the deal, removing conditionality and uncertainty, and negotiating price. The result is a detailed “Heads of Terms” which sets out the details of the transaction and is used as a set of instructions by the legal advisers for drafting the main sale and purchase agreement. At this point, the seller should be ready to choose their preferred party. Executing the deal on the agreed terms is by far the most intensive part of the deal. The work involved is usually underestimated by our clientsIn general, it starts with due diligence on all aspects of the business including. g financial, tax, legal, operational, commercial, and technical aspects. On any deal a seller will receive an information request on each aspect of the due diligence comprising hundreds of questions and involving several advisers. We manage this aspect and know what is reasonable to ask and where to push back and organise information in a data room .Alongside this, the legal process involves drafting the main agreement alongside any number of ancillary documents. Having an experienced commercial M&A lawyer is critical, they will know the right battles to fight to ensure that the timeline is met. During this process, it may be necessary to introduce other members of your team to help fulfil the information requests, and because they may be critical to the business after the deal. This is a sensitive issue and buyers tend to be sympathetic to this. Over a period of up to four months this work is completed. During this time, we get to know our clients very well there is nothing more satisfying than a successful completion! I hope this has given an insight into the mechanics of a business sale. Importantly, we also wanted to put some more detail on the role of an adviser. A business sale may well be the single largest contributor to wealth that you have experienced to date and a transaction that will be unlike any other you have experienced, so its well worth having an expert to help and advise you along the way. www.knightcf.com “Tip of the iceberg” is not an adequate metaphor. The sales process is time consuming, complex, resource intensive and at times extremely stressful over a period of up to 9 months. For the majority of our clients, it’s a genuine life-changing milestone, but one that can hinge on a number, a customer, or even a perception. This is what you can really expect from a competitive sales process designed to realise maximum value for your business. It falls into two clearly denominated sections: marketing and execution. The former is about attracting the right buyer and the right terms (not just price) for the business. By introducing competition, we find that the final offer price is typically 10% or more higher than initial bids (which always makes us wonder why companies sell “off-market”). At the end of the marketing process, you are left with a single buyer and in reality, this is the last time you will be able to negotiate the price upwards. The execution phase is about consistency and trust and encompasses the due diligence and legal processes. The buyer and seller really get to know each other here and for the deal to complete, the buyer has to honour the terms agreed and the seller has to evidence that everything they have said about their business is true. Our business is based on success, we make our money from success fees that only become payable on completion. This aligns our objective with our clients, the most important of which is to “only start a deal if you are confident it will complete”. It is therefore imperative to ensure the business is fully prepared for a transaction. Some deals do abort, and when this happens this is most likely to occur at the due diligence stage –maybe four months down the line, which is a significant investment of time and resource – and so the preparation phase lays the groundwork to ensure a 51 PRINTITRESELLER.UK 19 Adam Zoldan
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