The reality of life is that all business owner managers will have an exit event at some point. The form this takes will vary but often will be some sort of business sale – whether to a trade buyer, to the management team or to an external investor. Whichever the option one thing is certain – the better the exit is planned the less stressful it will be and the greater the value that will be realised.
Preparing for an exit requires long-term planning and will involve steps to enhance value, manage risk and ease the transition to new ownership. A well-structured exit plan enhances investor interest and drives greater value for the business owner as well as protecting the legacy they have created.
1. Assess Current Value: Obtain an independent valuation to understand your business’s current worth and identify key drivers affecting its value. Determine areas for improvement.
2. Define Your Target: Determine the minimum sale price you need, considering any future plans and financial needs. Understanding what you “need” allows you to benchmark what you “want!”
3. Bridge the Gap: Calculate the disparity between current value and target price. Develop strategies to close this gap effectively.
4. Ensure Tax Compliance: Keep tax affairs up to date, ensure all tax returns are submitted, outstanding tax payments are made, and resolve any HMRC enquiries promptly. Identify and manage tax risks. Have all necessary documents (for example share scheme agreements, HMRC clearances) readily available and retain any copies of any tax advice given.
5. Companies Act Compliance: Maintain accurate Companies House filings, update statutory registers.
6. Secure Key Contracts: Confirm all essential contracts are active and up to date, including employment handbook and policies (ensure up to date and compliant), customer and supplier agreements contracts. Identify which are subject to change of control clauses.
7. Optimise Management Information: Provide comprehensive and up-to-date management information to demonstrate operational efficiency and business control. Buyers want to make sure sellers are on top of their business!
8. Evaluate Management Team: Assess your management team’s capabilities, identify gaps, and plan for succession. Develop strategies for knowledge and relationship transfer – work to make yourself redundant!
9. Engage Key Personnel: Align incentives with business success by linking rewards to the company’s ultimate value. Consider implementing share schemes (EMI, growth shares) to maximise commitment and engagement. Designate a transcation lead internally to manage the exit process, minimising disruption to day-to-day operations.
10. Engage Expert Advisors: Involve key advisors early on for optimal results. Assemble a team including legal, accounting, tax, wealth management, and corporate finance professionals.
By following these top tips, you can effectively prepare for an exit, maximise your business’s value, and ensure a smooth transition process.
ETC Tax has extensive knowledge when dealing with Succession so please do get in touch. We are also running a series of Webinars on the topic so click here to find out more.
Optimized by Seraphinite Accelerator
