How can you best prepare your business for sale?

Business Leader Magazine recently sat down with founder and chief executive of consultancy firm Hyman Capital services, Clive Hyman, to discuss how to prepare your business for sale and how to get the best price.

After leaving KPMG in 2005, Hyman set up his own company which now offers fund raising services, deal structuring, refinancing, merchant banking reviews and debt advisory consultancy. They also give guidance to help with audit tenders, sales and marketing and due diligence.

How can you prepare your business for sale?

You need to ensure all the issues with the business are understood and comprehensive plans are in place to work on fixing the major items.  It would be sensible to start on this at least 18 – 24 months ahead of the exit to ensure the effects are felt on the profit line.

One great way to get an idea of what needs to be worked on, is to get an external company to do due diligence on your business – this process highlights any issues and avoids some nasty surprises further down the line.

How do you ensure you get the best price?

Define what you are selling and what you’re not selling. Ensure you maintain business as usual throughout the whole process – no buyer wants to see your sales and profits dropping! Appoint a project manager – selling requires a lot of time and energy.

And, identify shareholders’ and other “one off” expenses that have been charged to the profit and loss account. These may need to be added back to the profit and loss statement to establish the recurring profitability of the business. Buyers like to see consistent trends and therefore a sale may need to be managed over a two to three year period taking in to account the industry, the market, managing sales and achieving a targeted growth curve.

How do you maintain due diligence through the process?

You just need to keep focussed on the documentation of the assertions and statements being made and follow them up as best you can. Flag up any changes as soon as you can.

Do you have any particular advice for somebody looking to sell their company?

You need to make your own decision about timing and price.  And you need to go with your instinct.  Make sure you get enough views about what exit strategy is appropriate.  For example, you might choose to buy-out your existing shareholders and grow the company before exiting.  Try to be realistic on the exit values, as many people get carried away and have too high an expectation.