Ali Robertson — June 12, 2020 
There is no doubt that selling a business is an emotional rollercoaster from start to finish. For most owners, selling their business is the culmination of many years of work and a once in a lifetime opportunity to realise value for all of those hard yards.
Unfortunately, no sale process is ever straight forward – there will always be twists and turns along the way. This article aims to outline five key tips to streamline and simplify the process, allowing you maximise the value of your business and complete a successful sale.
1. Failing to prepare, is preparing to fail
The importance of detailed preparation cannot be understated when selling a business. You wouldn’t put your house on the market without cleaning and decorating, so why would your business be any different? Despite this, numerous business owners still fail to prepare their business for sale, instead preferring to wait until they have an offer on the table before taking action.
This is a dangerous game. Not only will it delay a transaction from progressing as you scramble to pull together the necessary information for the buyer’s due diligence, it also prevents you from managing potential deal issues up front with the buyer. This is one of the most common reasons for transactions falling over after initial terms have been agreed.
Detailed preparation is therefore vital in maximising the value of offers and then protecting this value through to completion. A comprehensive financial, legal and commercial review of the business should ideally be undertaken at least three months prior to commencing a sale process, to allow any issues to be addressed and the business to be presented in the best light.
2. Confidentiality is key
Selling your business is an intrusive process and involves sharing a significant volume of sensitive data with third parties. The vast majority of sale processes will involve discussions with at least one competitor and it’s therefore essential to carefully manage confidentiality.
This is done in two ways. Firstly, Non-Disclosure Agreements (NDAs) should be signed by all interested parties before any confidential information is shared. This provides protection for you and your business, preventing buyers from using your information for commercial benefit, poaching your staff or approaching your customers and suppliers.
Secondly, even with an NDA in place, you should still be careful about when and how highly sensitive information (such as product pricing and client lists) is shared with interested parties. Data of this nature should generally only be shared once Heads of Terms have been agreed and exclusivity has been granted to a single buyer. By holding this key information back until later in the process, the risk is minimised and only released once the headline terms of a deal are in place.
3. Detailed Heads of Terms are vital in protecting value
Heads of Terms are documents which set out the fundamental terms agreed between parties for a transaction. Whilst they are not legally binding (other than confidentiality and exclusivity provisions), they are a useful way of negotiating key issues early in the deal process, allowing a simplified and shortened process after signing.
When selling a company, there is a very delicate balance of power. In the initial stages, this power rests with the seller as you have your pick of potential buyers, in addition to maintaining control over the information being shared and the timetable for the process.
As soon as Heads of Terms are signed and exclusivity is granted to a single buyer, however, the power shifts to the other side. At this stage, the buyer knows that they are the preferred bidder and are likely to take a more aggressive approach in relation to certain deal issues.
Preparing detailed Heads of Terms is therefore a highly effective way of agreeing as many key points as possible whilst you still have control. Whilst this may take more time than signing a simple offer letter from the buyer, it’s well worth it in the long run to avoid difficult conversations further down the line once the balance of power has shifted.
4. Focus on quality, not quantity of buyers
There is a common misconception amongst business owners (and their advisors) that approaching as many potential buyers as possible is the best way to maximise value. This has its place, particularly when selling to private equity, but it is rarely beneficial when dealing with corporate buyers.
This is firstly due to confidentiality concerns. Taking a scatter-gun approach to marketing your business is likely to attract “interest” from numerous parties, but many of these will simply be fishing for information. Whilst the steps outlined earlier will help to reduce the risk of your confidential information being leaked or used by competitors, it’s significantly more difficult to control the use of information when it has been shared widely.
Secondly, approaching a broad pool of potential buyers means that it is near impossible to deliver a tailored message to each. This often leads to the sales message becoming very generic and fails to effectively outline the opportunity for each individual buyer.
By focussing on a small number of strategic buyers for whom there is a clear strategic rationale for the acquisition, you can deliver bespoke presentations to each, which highlight the value your business could add to their company.
In doing so, you will be emphasising the potential synergies available from the transaction and this will help to maximise the value they attribute to your business.
5. Don’t do it alone
Selling your business is a very private matter and most owners want to limit the number of people with knowledge of the transaction as much as possible. In many privately owned businesses, this results in a single individual attempting to manage the sale process in isolation. Whilst this is commendable, in reality it is impractical and often puts the transaction at risk.
It’s therefore important to take support in whatever form suits you best. This could either be through the use of advisors, and/or bringing other members of your management team into the “circle of trust” to support with some of the heavy lifting during the process.
When bringing other members of the management team into the loop, it’s beneficial to have them sign NDAs to avoid news of the deal leaking to other staff members. It is also worth considering the incentivisation of your management team through transaction bonuses (or other tax efficient alternatives). This is an excellent way of ensuring that they go above and beyond to ensure that the transaction completes successfully and value is maximised.
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