Legal Brief: with Lynch & Co.
Selling your Business Become “buyer ready”
As a first step when selling your business, it is important to place yourself “in the shoes” of an astute prospective buyer, and assume that person will also be receiving quality professional advice. You should set a “pre-sale action plan” with the goal of being ready to negotiate with such a buyer - to achieve your desired outcomes. By doing this, you will:
• have considered and addressed the key issues which the “astute prospective buyer” would likely raise;
• be more likely to maximise your sale price; and
• ensure a smoother, quicker and more cost effective sale process.
You should start this process now, even if you are not thinking of selling right away. It pays to be “buyer ready” at all times just in case the unexpected happens (e.g. a downturn in your health). It may be as simple as committing a few hours each month towards achieving the goal of being “buyer ready”.
So what does it take to become “buyer ready”? Below are some high level steps as a guide:
1. Consider your objectives
Consider the following questions: when would be the ideal time to sell? Do you need to consider other shareholders or key people in the business – if so why and how? Who might be interested in buying your business and why – what will they be looking for? What price do you think it is worth and why? What do you see yourself doing post sale? You may think of other questions.
2. Get good initial professional advice
Invest in some initial assessment time with quality financial and legal professional advisers (i.e. both – not just either). Quality advisers will be able to objectively assess your thoughts, raise any further important issues that may need to be addressed, and assist with fleshing out and finalising your thoughts into an action plan.
3. Action your programme to become “buyer ready”
This will involve undertaking a sort of “self due diligence”, and addressing issues
such as:
• Reviewing all material contracts to assess whether a buyer would be legally able (and if so, then willing) to take an assignment of those contracts for the price you are asking. Are some “contracts” merely based on a handshake and need to be formalised?
• Reviewing your contracts with key employees and any other key people such as agents or licensees. It may also involve reviewing issues relating to other shareholders and financiers to the business.
• Reviewing the legal status of the intellectual property rights you believe you own or otherwise have the right to use.
• Assessing what material risks, liabilities (actual or contingent), or other issues might exist or arise that an astute prospective buyer would likely query.
• What will be required in order to make the financial statements for your business “buyer ready”.
The end result should be that the “astute prospective buyer” is convinced that the business has been well run and that the profitability will continue post-purchase with minimal risk and without major re-work being required. For further information, please contact Sean on 09 948 8433 or sean@lynchandco.co.nz.
For further information, contact Sean on 09 948 8433 or sean@lynchandco.co.nz
