FC is highly active in the field of private company mergers and acquisitions, particularly business disposals. We act exclusively as retained advisors and project managers, we are not merger-brokers and we don’t charge for making corporate introductions.
Experience has taught us that thorough preparation and research minimises the length of time required to market a business for sale and negotiate a deal with the purchaser. Time is of the essence – the longer the business is on the market the more difficult it is to maintain confidentiality and the more likely it is that something will go wrong.
Before we accept a disposal assignment we invest a significant amount of time:
- Reviewing the business and its performance.
- Discussing the vendor’s reasons for sale and personal aspirations (eg retirement or continuing to work in the business).
- Considering the optimum timing of sale and requirement for any pre-sale “grooming”.
- Establishing valuation parameters.
- Understanding other relevant factors, such as the vendor’s tax position.
Preparatory stage
Once we agree to accept an assignment we task our client with collating all the information we would expect a purchaser to want to see before making an in-principle offer. We then prepare a detailed information memorandum. There is significant skill involved in this exercise – the information memorandum needs to portray the business as positively as possible, but if material adverse information is left out, any in-principle offers that are received are likely to be reduced later when due diligence takes place.
During the initial phase, we also prepare a list of target purchasers. Each brief is agreed individually with the client, but we usually prefer to market the business selectively to a small number of prospective purchasers. In preparing the list, we aim to identify potential purchasers for whom the acquisition would make strategic sense and who are able to fund the transaction. Large companies with a history of acquisitions of similar businesses are particularly likely to be included. We identify potential acquirors through discussion with our client, through the use of sophisticated computer databases and through dialogue with other corporate finance intermediaries. We always think laterally - the list of prospective purchasers might include:
- UK trade buyers (private or quoted).
- Overseas companies.
- UK shell companies or companies looking to diversify into new markets.
- Institutional purchasers (eg venture capital funds).
- Buyout or buyin teams.
- Serial entrepreneurs
Marketing stage
We only approach prospective purchasers whom our client has approved.
Usually, we make a discreet approach by telephone to the Chief Executive of the prospective purchaser. We are highly experienced at making such approaches. We know how to get to the right person and establish his/her interest while respecting the requirement to maintain confidentiality.
Save in exceptional circumstances (which always have to be approved by the client), an appropriate confidentiality undertaking is obtained before the information memorandum is released to any prospective purchaser.
We co-ordinate the process of issuing information memoranda, answering any queries and requests for further information and arranging any meetings or site visits that are required.
Agreeing a deal
A successful marketing of a business ideally leads to several in-principle offers being received. Usually, the purchaser will only commit resources to negotiating detailed terms and undertaking due diligence if the vendor grants (limited) exclusivity. For the vendor, selecting a preferred bidder is a crucial step – it will be difficult or impossible to reactivate a favourable deal with other bidders once they have been excluded. Assessing competing offers typically involves much more than comparing prices, as they may be structured entirely differently. It is of vital importance to evaluate the credibility of the offeror, form a view on whether it has the financial and operational resources to complete the deal and whether there is a risk that the offeror will seek to alter the deal later, without justification.
FC can help you choose the right purchaser for your business. We will analyse the numbers and explain the effects of risk and uncertainty. We know the right questions to ask to assess whether an offeror is serious and credible and know how to check the answers.
Due diligence
The preferred bidder will need to undertake some form of exercise to check that the information supplied about your business is correct and that nothing of importance has been withheld. This will usually involve site visits by the preferred bidder’s senior personnel and, in many cases, an investigating accountant’s report.
FC understand the due diligence process. We know how the investigating accountant thinks and acts. We can help you prepare for due diligence and deal with issues as they arise, thereby minimising the possibility of price renegotiation.
Completion
FC drives the timetable all the way through to the completion meeting. We co-ordinate the efforts of other advisers, who never usually meet the purchaser or its advisers unless we are present.
FC are experts in all aspects of the disposal process. We can help you find the right buyer for your business, negotiate the best deal and make it happen.
Alternatives
There can be a variety of reasons for a private company entrepreneur to think about selling his/her business. For example, there may be a desire to convert some of the “paper” value into cash so it can be spent or invested elsewhere. Alternatively, one shareholder may wish to exit but the other(s) may be happy to continue.
When we are consulted about a possible business disposal, we always, as part of the preparatory stage, consider alternatives. Sometimes we can suggest an innovative solution that will provide a more favourable outcome, for example:
- Debt-for-equity swap, enabling cash to be realised without parting with control of the business.
Partial disposal (eg to an institution or joint-venture partner).
Some shareholders buy the others out.
Piecemeal disposal.