Monthly Archives: November 2014

DRESSING UP YOUR COMPANY FOR SALE

The following are some ideas that should be explored in order to maximize the amount of money that the vendors receive and to show the company in the best light:

  • Take out all or part of the cash  There may be no need to keep all the cash within the company. This could be distributed by way of dividend, payment into the owner’s pension fund or repayment of any directors’ loans. Alternatively if it’s more tax effective to do so, then the sale price can be inflated by the cash at bank figure so that in addition to the agreed purchase price, the purchaser pays “cash for cash”.
  • Make sure NAV matches up with p/e, ROCE valuation  Sometimes the Net Asset Value (NAV) is out of kilter with any normal valuation of the business, this can for example be because the company owns its premises. In that case it may be sensible to move the property into the director’s pension fund and lease the property back to the company; this will reduce the profitability but will transfer an asset with a good yield into the director’s pension. You should do the calculation to see if the benefit of extracting the property asset from the company exceeds the resulting reduction in the goodwill value because of the lower profit figure.
  • Repay directors’ loans  These should be repaid prior to a sale, if the cash is available. If it is not then they will normally be repaid out of/deducted from the sale proceeds at completion.
  • Sell car to owner   Very often the owner will have a car that they will want to keep after completion but which is owned by the company. Legally the company is entitled to keep the car, however if the owner wants to keep it, it needs to be either transferred before completion or specifically identified and excluded in the sales memorandum.
  • Do a stock-take  This should be done before putting the company on the market as this is the classic area in which purchasers chip away at the price. The vendor needs to clear out or write off any old or redundant stock so that the balance sheet is a true reflection of the company’s net worth.
  • Clean up the balance sheetThe projected completion balance sheet should look clean and tidy and not contain any items which need explanation or which cause the purchaser to worry about the can of worms he is about to buy!

Call now for a FREE, no obligation business valuation. Your call will be treated in the strictest confidence and of course, places you under no obligation. Call now on 0800 046 1792.

COMPANY SALE STRUCTURES

COMPANY SALE STRUCTURES

Every deal is different and purchasers and vendors may have different ways of achieving what they want. Some examples:

“Earn-Out” means that a part of the purchase price may be paid to the vendors over a period of time after completion (“on the drip”) provided for example that they stay working for the company and/or the company achieves certain pre-agreed profit or other targets.

“Vendor Financed” means that part of the purchase price may be loaned to the purchaser by the vendor to enable completion to take place. Normally the vendor will get, as security for the loan, either loan notes or a hybrid form of shares; they may also get a mortgage over the company, although this is usually a second mortgage behind the bank or a personal guarantee from the purchaser. Vendors traditionally are reluctant to provide this sort of finance; however it may be required in order to achieve the sale price they are seeking.

“Lock-Step” means that the purchasers buy an initial shareholding which is then increased as certain milestones are achieved.

Call now for a FREE, no obligation business valuation. Your call will be treated in the strictest confidence and of course, places you under no obligation.

Call now on 0800 046 1792.