While you should always feel comfortable asking questions, the following will give you a better understanding of the process.
STEP 1 - PLANNING
Owner interview and data gathering
This gives a clear understanding on the history and the performance of the business.
Recast financial statements
Normalising the accounts involves adjusting the accounts by adding back interest on debt that won’t transfer, one-time non recurring expenses and to remove benefits accruing to the owner that aren’t related to the actual operation of the business
Provide opinion of market price range
Switch Business prepare a full market appraisal of the business utilizing various valuation methodologies including a market comparison to other similar businesses that have been sold.
Obtain Authority to Sell
This agreement authorises Switch Business to act on your behalf. It outlines our fee structure and both parties’ responsibilities.
Prepare Business Information Memorandum
This document will eventually be released to qualified buyers who have completed a confidentiality agreement and it is very important that it is a true representation of your business. It provides preliminary information on your business enabling Purchasers to determine whether it fits their buying criteria.
STEP 2 - MARKETING
Implement marketing programme
Any marketing that is undertaken will not identify your business (unless agreed). Switch Business uses a multi faceted approach, with our database of qualified buyers being the most powerful. Other marketing may include national newspapers, trade publications, industry databases, or magazines.
Screen response
Initial discussion with interested parties to ascertain whether the business fits their buying criteria.
Obtain confidentiality undertaking
This is obtained from all purchasers before Switch Business reveal any information that could identify your business.
Qualify buyers
This is to ensure that they have the financial resource, business experience and commitment to complete the transaction.
Present Information Memorandum
The purchaser is provided with the Information Memorandum (which you have previously signed off on).
Determine buyer interest
Once the purchaser has studied the Information Memorandum Switch Business follow up to ascertain whether they have any interest in pursuing the business purchase further.
Arrange first visit
Switch Business generally have this meeting in our board room, this does not disrupt the business. If a site visit is required this is usually arranged after hours.
Provide further business details
As a result of the initial meeting, the purchaser will have a list of questions to be answered.
Negotiate offer from purchaser
This will generally be in writing as a Sale and Purchase Agreement or a Heads of Agreement. The agreement sets out all the terms and conditions of the offer and will almost always be dependent on the purchaser completing due diligence to their satisfaction.
Facilitate negotiations
Switch Business will lead the negotiations on your behalf to ensure you receive a premium price for your business. You will be advised to seek the relevant legal and accounting advice from your other advisors.
Obtain sale and purchase agreement
Once both parties have signed the contract there are now various conditions that need to be satisfied.
Agreements to solicitors
Each original contract is sent to the respective solicitor.
STEP 4 - DUE DILIGENCE
Assist in satisfying conditions
The contract is usually conditional on due diligence, finance and if a lease is involved upon obtaining the Landlord’s consent for the assignment of the lease. Switch Business is involved in all steps of this process and will liaise with professional advisors to ensure that all conditions have been satisfied.
Due Diligence
Due diligence is the process where the Purchaser along with their accountants and solicitors will examine the business in more detail. This usually involves an audit of the company’s financial and non-financial position and performance. Until this stage most of the information provided has been accepted on its face value and now the purchaser would like it verified. This process normally takes between 10 to 15 working days depending upon the complexity of the business and also on the ease in which information is available. Switch Business works closely with all parties during this process, ensuring that any confidential information is protected and that the day to day operation of the business is not disrupted.
STEP 5 - CLOSING
Confirm unconditional
The contract is usually declared unconditional in writing by the purchaser’s solicitor, and both parties must honour the agreed transaction.
Deposit into trust account
Once the contract is declared unconditional, Switch Business will ensure the deposit is paid into their audited trust account and be dispersed according to the relevant law.
Settled sale
During the period between when the contract is declared unconditional and possession takes place, both parties and their accountants and solicitors will attend to any legal requirements that need to be finalized. A stock take is usually done before settlement and the settlement sum adjusted to reflect the value of stock (stock is calculated at cost price with any adjustment made for old and obsolete stock)
Seller’s Assistance
The Vendor will generally be required to assist the new owner in the running of the business for an agreed period of time (usually up to four weeks), payment for this period is included in the purchase price. Any assistance beyond this period is usually by prior mutual agreement at an agreed rate of compensation.
SUMMARY
To a first time seller the above process may seem overwhelming, however the brokers at Switch Business have been involved in hundreds of successful sale transactions and are able to lead you through the process.
If you wish to have a confidential, obligation free chat or come in for a coffee, contact Switch Business today.
Article Source: BuyaBiz Blog
Greg Longstaff
Business Development Consultant
Franchise Network Specialist
greg@salesmarket.co.nz
+64 9.307.7860
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