Yorkshire and North East Dealmakers Guide 2016 - 22

22 SELLING YOUR BUSINESS SELLING YOUR BUSINESS Private equity buy-in or buyout Private equity firms typically look to invest companies that have the potential for high growth. The investment firm will aim to achieve growth by working with the management team to improve the company's performance and work on its strategic direction. Once objectives - personal and the business - have been clearly defined, it should be easier to work out a timeframe and roadmap for the sale process. A typical sale may well take a year, sometimes more, but there is no hard-and-fast rule that determines this. Now let's examine the sale process and what needs to be done to ensure the process is smooth and the best result is achieved. There are four stages in the sale process: Market testing - researching potential purchasers and making initial approaches. This part of the process will be carried out by the advisers appointed by the business owner and they should be in place 12 months in advance of the sale. Market testing involves understanding where the business fits in the market and how it compares with its competitors. A long, hard objective view of the business, the sector it is in, how it is performing compared with competitors and the overall economic landscape at the time. This will determine whether the time and conditions are right for a successful sale to be realised. Preparation - grooming the business for sale, ensuring the timing is right and drafting an information memorandum about the business. The preparation Negotiation - the detailed evaluation of interest, receiving offers, negotiating and reaching an 'in principle' agreement. This will be led by the advisers for this should start well in advance, ideally something like a year before the anticipated sale. The owner of the business should demonstrate clear leadership with this, and ensure that a strong management team is in place to continue the day-to-day running of the business. but a strong owner of the business will want to be regularly informed of progress and be able to influence and intervene where necessary. Flotations For firms that have achieved high growth over a short period of time, floating on the London Stock Exchange can be an attractive option. It is more complex and time-consuming, and is typically part of a strategy for raising funds to grow the business, rather than simply selling out. THE SALE PROCESS Completion - the drafting of contracts, financial agreements, due diligence and contract signatures. EMPLOYMENT CONSIDERATIONS One of the most challenging aspects for any business owner looking to sell is what happens to the employees after a change in ownership. According to Andrew Rayment, employment partner at law firm Walker Morris, there are three common areas of concern crop up. The first is deficiencies in the documentation and arrangements for protecting business information and relationships. Rayment says: "Too often the provisions put in place to protect business critical matters are deficient, meaning there is a risk of key people or information leaving the business. That can be easily addressed by having proper restrictive covenants and clauses to deal with confidential information." The second issue is the increasing focus on immigration and the right to work. Rayment believes this "is moving up the red flag list since, as well as the spectre of criminal liabilities and significant fines, one can end up with a situation where a business critical individual no longer has the right to work in the UK. This can mean that the business which has been bought can't function!" The third issue relates to ensuring that regulations relating to lower-paid workers have been properly dealt with. Rayment says: "While the amount of money owing for one particular

Table of Contents for the Digital Edition of Yorkshire and North East Dealmakers Guide 2016