Considering selling your business? Then investing in a pre-sale organisation will make it easier to attract buyers says Tom Webb, Commercial Partner at Mogers Drewett
Pre-sale reorganisation is a proactive way of making your business easier to sell. The easier your business is to sell the more prospective buyers you will attract and the better position you will be in to negotiate a price as there will very little ambiguity in understanding the assets and liabilities of your business that are for sale.
Reports may indicate acquisitions are on the rise but buyers are still risk adverse, only exploring businesses demonstrating good, solid assets. To convince a buyer your business is a good prospect you should consolidate your assets, liabilities and contracts into one business entity – which then forms your sale package. This is particularly important if your business has grown up by acquisition or has many divisions because it’s likely the business assets will be spread across different entities. This may sound complex but it is what known as a pre-sale reorganisation. Many buyers don’t want the expense and time involved in conducting one themselves and by reorganising the buyer gets a clear picture of what assets and liabilities are actually on the table and included in the business sale. This provides a degree of certainty which also avoids the need for large contingency budgets to be factored off the purchase price and a more focused due diligence can be conducted. As the seller you are showing prospective buyers a clean sale and purchase agreement which will ultimately reduce the costs of the whole purchase process.
Use this reorganisation process to review all current business contracts particularly those historic contracts that are based on verbal agreements or continue on the basis that they have operated for years which to you as the seller is not a problem but to the new prospective owner has risk written in big letters right across them. By ensuring all contracts have standardised and up to date terms will be reassuring for the buyer.
Pre-sale reorganisation can also help identify where any necessary third party consents or restructuring may need to be obtained in order to complete a transaction of sale. Gaining reassurances from any third parties or partners that in the event of a sale they won’t change the status quo of their business terms can remove a significant distraction from any sale both for the seller and the eventual buyer.
Ultimately, the major benefit of a pre-sale reorganisation is it puts the seller in a better position and increases the flexibility to sell at short notice as the business is packaged up, ready to be sold while continuing to operate on a daily basis.