Sell your Business Series – 5 Key Things to Prepare Before Selling Your Business

March 23, 2021

Welcome to the fifth blog in our “Selling your business” series. When looking to sell your business, you can never be “over-prepared”. You can, however, very much be under-prepared, and many sales of business are unsuccessful for this reason.

At Bluebox CFG, our team of corporate finance professionals have more than 100 years of combined experience in mid-market M&A. Using this, we have compiled below what we consider to be the 5 key things you need to have at the ready before you embark on selling your business.

 

1.     Health check

It is a sad fact that over 90% of all businesses ‘taken to market’ by Corporate Advisors fail to sell. One of the main reasons for this is that there are ‘skeletons in the closet’ that are unearthed late in the due diligence process. To protect against this, and to give yourself the best chance of achieving a successful exit, you should review key areas of your business such as intellectual property, employment, health and safety and tax to check against any material issues that may arise.

 

2.     List of buyers

Before you “go to market”, you first need to identify the buyers you are going to speak to! The list of buyers will heavily depend on your objectives for the exercise and the exit route you have chosen to take.

Determining your list of buyers is probably the most important element of any sale exercise. Not only do you need to identify buyers who are likely to have interest in buying your business, but they also need to have an ability to pay. The latter, particularly in the SME space, can be challenging; often the relevant information is not disclosed publicly.

Just as important as identifying the buyers to reach out to, is approaching the right people within these organisations. The right people will depend on the size and infrastructure of the buyer; many large companies have internal M&A (or Corporate Development) functions, so this team will be the best initial port of call. For smaller or medium-sized businesses, you will want to contact the decision makers (usually C-suite level e.g. CEO or CFO).

 

3.     Marketing materials

An Executive Summary / Teaser is a short document that is sent to your buyers when they are first approached. Whilst it may be brief, it should contain sufficient information about your business (what it does, what makes it special and headline financials) to stimulate initial interest.

An Information Memorandum) is a document, which is distributed (in most cases) once an NDA is in place. This is typically a more detailed document, containing additional information on the company’s operations, growth strategy and financials.  It should contain sufficient information to whet the appetite of buyers, however it should not contain any commercially sensitive information – as you cannot always control where it ends up!

 

4.     Data room

During a sale exercise, there will be a requirement to share information about your business with potential buyers. This will certainly be the case in due diligence; however, buyers will often ask for additional information in the initial stages of the process too. It is advised that any information shared is done so via a data room.

A data room is an online storage facility, where you can upload documents for third parties i.e. potential buyers to have access to. Using a data room (as opposed to freely sending documents by email) enables you to share information in a controlled manner and monitor the activity of those in possession of it; a good data room will allow you to see who has accessed which document.

Preparing a data room can be very time consuming, so it is recommended this is done as early in the exercise as possible.

 

5.     Data Book

A data book (usually in an Excel spreadsheet) is a great way to compile financial information about your business to share with potential buyers during the sale process. An Information Memorandum will contain limited financial information and buyers will need to understand this in more detail before putting forward an offer.

 

If you are thinking about selling your business and would like a call to discuss how we can help, please call us on 0203 924 5150, or email us at info@blueboxcfg.com.

Our next blog will discuss what a typical M&A process looks like from first approaching buyers right up until due diligence and completion. Keep your eyes peeled!

quote marks icon

Testimonials