How to exit your business

Selling your business can be a tricky, confusing and sometimes painful process!  However, with some careful planning and right choice of advisers, you can enjoy a relatively smooth and successful experience.

We have set out key steps you can take to ensure you are in the right position to maximise value from your exit.

Pre-planning

When it comes to selling your business, it is best to put yourself on the front foot by making it attractive to potential buyers. You can reduce time spent on due diligence and minimise red flags that may put buyers off by pre-emptively addressing potential buyer concerns. Ensuring statutory books are up to date, resolve any lingering employment liabilities, ensuring all compliance requirements have been met and all key contracts are securely in place are just some of the things you can do to ensure a smooth sale.

Make good connections early

Your choice of corporate advisor can be the difference between a successful exit and a de-moralising and costly disappointment. Choose advisors carefully – those with a proven track record in getting to know businesses, identifying strong potential buyers and who can negotiate a good deal on your behalf. Look for advisors that have experience with working with companies of a similar size to yours, with good industry experience.   At Clarkslegal, in addition to an impressive history of quality M&A transactions, we have close contacts with a select few high-quality corporate finance advisors, meaning we can make introduction to advisers who we know can make a positive difference

Understand the transaction

Exits can take various forms and each deal has its own nuances, but there are broad structures that are common across most transactions. Most exits begin with confidentiality and exclusivity agreements once a suitable buyer has been found. This avoids prejudicing the target business and provides a level of certainty to the parties.

This is followed by due diligence, which allows the buyer to identify any issues with the company that may reduce its value or present problems in the future. Proper preplanning can make this process much smoother and can have a big impact on negotiations leading to completion.

However, completion of the exit is rarely the end of involvement for the exiting party, as buyers will often wish for owner-managers to continue involvement with the company for a period following completion to ensure a smooth transition and business continuity.

Types of Exit

As a seller looking to exit your business, there are a range of options to choose from.  Your choice will largely depend on tax considerations and a buyer’s preference.

A share sale sees the entirety of the business, assets and liabilities included, sold to the buyer. These generally take longer to negotiate given the greater risk for the buyer but can be better for a seller seeking to rid himself of all liabilities associated with the business.

Alternatively, an asset sale sees the buyer picking and choosing which assets and liabilities to take on, such as IP rights, stock and goodwill. These can be favoured by the buyer as they can cherry pick the good and leave the bad.

A management buy-out is when members of a company’s existing management team purchase some or all of that company. These are suitable for companies with strong management teams and can provide assurance to you that the business is in capable hands.

Employee-ownership trusts are an increasingly popular method of exit. Such transactions involve shareholders selling their shares to a trust, which holds the shares for the benefit of the company’s employees. The benefits of EOTs largely lie in providing owner managed business owners with the ability to sell their business at a time of their choosing without having to rely on trade acquisition, and there can be tax benefits too.

At Clarkslegal we are specialists in advising the owners of SMEs and owner-managed businesses on successfully exiting their business.  We have strong track record of advising owners on sales, having acted on numerous transactions. We have a strong focus on working with owner-managers, understand the challenges of trying to run a business at the same time as trying to sell it.  We understand the personal and emotional aspects of a sale as well as the need to provide good value for money.

If you are looking to get exit your business, let’s arrange a coffee and a free one-hour chat with one of our corporate lawyers.  We will assess and help you understand your options.