Trade sales
All answers are for general guidance only. Each case must be handled on individual facts.
Q: What is a trade sale and what's involved?
This is a sale to another trading business as opposed to a financial investor such as a private equity house.
Careful pre-sale preparation will enhance the attractiveness of the business to potential acquirors and so maximise the sale valuation. This exercise can take anything from a few months to several years and involves positioning the company to attract strategic buyers, maximising recurring profits, and extracting surplus assets from the balance sheet.
Key to a successful trade sale is securing access to a wide range of potential buyers. The ideal trade purchaser will both pay a premium price and add value to the business going forward. The buyer able to deliver the best deal may not be from within the industry or the UK, so extensive research and lateral thinking about acquirors is vital.
There are several different sales strategies. You could be dealing with an unsolicited approach from a competitor. Alternatively, the seller takes the initiative and may run a formal or informal competitive auction amongst a group of targeted buyers.
Generally, the sale process involves:
• Appointing advisers and selecting the optimum sales strategy
• Preparing a sales memorandum – the key selling document
• Researching and approaching potential buyers
• Management presentations to buyers
• Soliciting and evaluating offers
• Negotiating a deal with the preferred purchaser
• Managing purchaser’s due diligence, including accounting, tax, and legal reviews
• Securing any clearances and regulatory approvals
• Preparing and agreeing the legal documents
Selling a business is a major exercise and from appointment of advisors to completion it may take six months or more.
A good financial adviser will have the experience to guide you through all stages, provide insights into purchasers outside your market and from overseas, and have the skills to maintain the competitive tension between buyers and so negotiate the optimum deal.
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