Asset or part sale
In either a full or part sale, a majority of shareholders should agree at the outset a guideline valuation for the assets or company shares to set a price hurdle for potential purchasers and avoid dissension at a later stage.
For more information on valuing a business click here.
In either a full or part sale,
a majority of shareholders should agree at the outset a guideline
valuation for
the assets or company shares to set a price hurdle for potential
purchasers and
avoid dissension at a later stage.
Sale and leaseback of assets
such a property can generate additional income either to pay off
higher-interest debts, to expand and increase profitability or, a less
likely
scenario, to reward shareholders.
If you're prepared to
sacrifice part of your profits, selling shares in your company could
also be an
option to raise long-term finance.
How you go about this
depends upon whether your company is privately owned or listed on one of
the
stock markets. If your company is listed on the market, the shares have
to be
offered to the public through a broker.
If your company is
privately-owned, wholly by you, by a group of private investors, by the
management
team or by a financial institution, you can with majority agreement
choose to
whom you sell the shares, perhaps taking the opportunity to bring on to
the board of directors experience you do not already have within the
company.
Bear in mind that, while
there are advantages to a partial share sale, which does not, for
example,
entail meeting the future interest payments associated with an overdraft
or
loan, it is a major and probably irreversible step and there are tax
implications
to consider.
Full sale
The starting point for a full sale is the same as that for a partial share sale. The majority of shareholders must agree both on the desirability of the sale and a guideline valuation for the company.
If the shareholders also
work in the company, they should recognise at the outset that the new
owner may
wish them to leave once the sale and purchase is completed.
If your company is listed on
one of the stock markets, there is a strict regulatory procedure
governing the
various stages and announcements and an absolute requirement for
confidentiality until the point has been reached for a public
announcement
through approved channels.
For a privately-owned
company, the process is less proscriptive. Nonetheless, poorly-timed
leaks or
gossip can be counter productive, not least because of the potentially
damaging
impact of uncertainty about the future on the company's workforce.
Private companies have been
sold in the course of a single conversation over a convivial dinner but
this is
the rare exception. The unsolicited offer which is too good to be
refused and
comes out of the blue is the unicorn of the company sales market -
everyone has
heard of one, but no one has actually seen one.
If you have taken a decision
to sell your company, then you should set a target timetable and begin
to
prepare your company, yourself and your key managers to achieve the best
possible outcome. For more information about the key stages visit
sections
three,
four
and five.
Forced sale
A forced sale usually comes down to health – the health of the business or the owner. Either way, the business valuation is likely to be depressed. Purchasers pay a premium to persuade a reluctant vendor and expect a discount for solving a vendor’s problem.
An unhealthy business either is, has been for a prolonged period or is
likely to be in the future unprofitable with little realistic prospect
of moving out of losses without a dramatic change of circumstances.
These changes might include:
- an injection of capital which the present owners are unable to
provide
- a new management team with different policies and ideas
- a takeover by a competitor or related business to give economies of
scale
In the worst cases, the business is in terminal decline because it faces
crippling litigation, cannot service its debts or pay its creditors. In
such cases, directors have strict legal obligations to their workforce
and their creditors. Seek legal and financial advice in good time.
Trading while technically insolvent can lead to criminal prosecution.
Such businesses may continue trading, usually at a reduced level, in the
hands of an official Administrator who will seek a buyer to give the
best possible return in the circumstances for creditors or it may be
compelled to cease trading and be placed in the hands of a liquidator to
be wound up.
Recent legislation provides for businesses which have underlying profit
potential to go through a form of pre-packaged winding up and immediate
resumption of trading, usually to the disadvantage of creditors.
