Welsh Businesses Prepare for a Smooth Exit

18|08|08

Owners that are looking to exit from their business need to start planning their strategy as early as possible in order to achieve the maximum value on exit. Mike Williams, head of the Corporate Commercial at John Collins and Partners LLP, explains how those people who have invested a lifetime in building up a successful business can facilitate a smooth exit and maximise value on a sale:

Successful business owners put so much hard work into running their business, so it is surprising how few of them actually consider how best to exit their business until shortly before they sell. Although, in the early years, focus will understandably be on survival, growth and maximising profits - after all, businesses are started in order to provide an income for the owners - it is easy to fall into the trap of putting off thinking about an exit.

Your business may appear to be running smoothly, but it is always possible that factors outside of your control, such as market conditions or ill health, could force an early sale, and it is vitally important to prepare for this scenario. The best way to be safe is by discussing an exit strategy with your advisers, as early planning is the key to a successful sale, especially if that sale is unexpected.

JCP has one of the largest corporate teams in the region, regularly acting for both business sellers and buyers, advising clients at an early stage what to expect. One of our Associate Solicitors, Nick Thomas, recently acted for the proprietors of Uplands Mobiles Ltd in connection with their exit from the business. He advised his client on a number of points they needed to consider, such as:

• When do you want to exit the business? The further in advance you have decided the more time you will have to plan for the sale and there will be less chance that the sale is dictated by extraneous factors.

• How much lead in time is required to prepare the business for a sale? For example, are your records in good order, do your employees have written contracts of employment, is your management team tied in, do you have formal terms of business in place. These are all issues that a potential buyer will review and may try and use to ‘chip’ the price.

• What price do you hope to achieve and what is a realistic price? One way people can do this is to look, objectively, at how much you yourself would pay for your business.

• Who is likely to buy your business? Parties could include a competitor, family members or perhaps a management buy out.

• Where is the value in your business and how can you maximise it?

• How will a buyer fund the purchase? In the current credit crunch it is more important than ever to discuss with the prospective buyer how they intend to fund a purchase. If a buyer does not have his finances in place a lot of time effort and cost can be wasted if a deal falls through.

• How much time does the business need to be marketed for sale? It is rare that you will find a buyer overnight.

• Have you taken advice to minimise the tax bill?

• How will you maximise the sale proceeds?

Finding the time to plan for the long term can be difficult, however planning your exit at an early stage will pay dividends in the future and it always helps to have an experienced advisor that can guide you through the process smoothly.

JCP has recently expanded its corporate team with the recruitment of Associate Solicitor, Nia Godsmark, from international law firm Decherts. This brings the total number of solicitors within the team to five, making it one of the largest and most experienced dedicated corporate teams in the region.

For further information on any issues discussed in this article, please contact JCP’s corporate team on 01792 773773 or email law@johncollins.co.uk