Posted on 21 October 2015
“Preparation for exit” is an essential part of the strategic process when selling a business. This strategic process should start well ahead of the formal sale process due to the number of factors that need to be considered and the time required to implement any necessary changes.
Preparing a business for exit helps maximise its profitability, makes it more attractive to potential purchasers and enables the formal sale process to run smoothly, ultimately resulting in a higher value for the business (and less stress for the seller!!).
Preparation for exit involves a root and branch assessment of all aspects of the business with the objective of maximising profit and cashflow and the reliability of that income, and minimising or removing any negative factors or risks. The assessment process can involve the creation of a well-structured “Electronic Data Room” to house all of your key data and contracts.
The process can involve numerous aspects ranging from tightening the accounting function of the business, strengthening management, formalising contracts with both suppliers and customers, ensuring HR matters are adequate, and checking that the company’s statutory legal requirements are compliant.
Over the years, we have encountered issues which have had to be dealt with during the due diligence phase of transactions such as historical share transfers which were not correctly registered; the extraction of non-core assets; and formalising key supply contracts.
Whilst such issues are not necessarily deal breakers, they can cause loss of value, anxiety and additional work, and can be avoided by seeking corporate finance advice at a very early stage.