Management / Shareholder Continuity

Planning for the future in any SME business is one of those jobs that is always put at the back of the queue. We spend years building our management team and often forget the value they bring to the business. Likewise when we come to replace them we are surprised by how difficult it is to find a suitable candidate.

The same can be said for the future ownership of the business. Is there planning in place for either the next generation of ownership or a sale pre or post retirement. The value of any business is subjective but if the return can be achieved for the owners by carful planning this is much better than having to take the only offer on the table.

The time and cost involved in buying or selling a business often has a much larger impact on the business than is expected. No purchaser wants to find that the first few months of trading after acquisition is well below expectations. But this is often the case with Key people from both sides spending time on the “deal” rather than continuing to run the business. Cedar Business Solutions are able to assist on either side of the transaction taking on the work required for the Due Diligence by either side. This allows the deal to happen without hours being spent in meetings with solicitors and the other side. It also allows for information to be filtered carefully so that there is no ambiguity involved when questions are asked.

It is often underestimated how much the costs of both a sale and purchase will final end up costing both parties. There are three key steps that will help to manage costs.

Firstly agreement from both sides what they are buying and selling. What is included and excluded and on what basis this transaction will complete or fail.

Secondly what is the consideration price? Again this appears to be a simple question but one that often is confused by events. Having agreed the price an agreement what events will affect this in the Due Diligence process.

Thirdly a detailed heads of terms document setting out clearly each parties understanding of what is agreed and what is subject to negotiations. Only after this is agreed should formal contracts be drafted. It is also at this point that fees are confirmed as up to this point both parties should have been responsible for their own costs and advise.

A fair equitable deal is always easier and cheaper than a contentious one sided deal. Although on occasion the process can be very quick, it often will take weeks and sometime many months for a deal to be finalised. The longer the deal takes the more costs that are ensured as information has to be confirmed and re-confirmed more than once.

If you would like to explore the purchase or sale of a business with us we will be happy to explain the process and provide a valuation if required. We also have access to funding options as required.