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Big Decision!
Each year in the U.K. thousands of businesses change
ownership... some attract large prices reflecting quality
businesses and excellent growth prospects - others with
poor trading history are sold off cheaply! Sometimes
for nominal amounts. Whether you are considering buying
a business or selling, the decision has immense financial
implications for you and your family.
The selling of family-owned businesses also has inherent
'emotional' problems and there may be complex family
shareholding and ownership/control issues to resolve.
Buying a Business
For many people, the quickest and less risky route
into owning/managing a business is to buy an existing
business (whole or in part). An alternative is to buy
into a franchise operation.
The fundamental problem is that the vendor (seller)
of the business wants to maximise the purchase value,
whilst as a prospective purchaser, you understandably
want to minimise it!
You should always seek professional help - both accounting
and legal to ensure a successful deal. Some fundamental
principles of the transaction are:
- Why is the business
for sale? - there may be perfectly legitimate
reasons, e.g., current owner(s) wants to retire;
ill health forcing sale, no family succession
- What is the quality
of its operations, people and customer base?
- How will you value
the business?
- How will you pay
for it?
- What is the real
profitability of the business and what are
its prospects? Remember that past-profits
and turnover (sales) are not a guarantee of
future profitability
- Do you need independent
valuation of fixed and current assets?
- What liabilities
exist? - actual & contingent (i.e. could occur
depending on certain actions/issues)
- What employment and
other contractual commitments/duties and obligations
would you inherit?
- Have you unrestricted
access to talk objectively with existing suppliers
and key customers?
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This is not an exhaustive checklist. Professional advisers
can help you undertake a 'due diligence' review to assess
the quality of the opportunity and provide an indicative
purchase value for negotiation.
Selling Your Business
This time your advisers have the professional duty
to maximise the sale price! You can negotiate a pre-agreed
'success fee' with your advisers if the transaction
is completed to your satisfaction.
Once you have made the decision to sell your business
then you need to discuss with your advisers the nature
and timing of the sale.
Issues you need to consider carefully include
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- How you will value
the business?
- The tax implications?
- Sales memorandum
and related documents
- Identifying likely
purchasers
- Whether to use 'company
brokers' who match vendor/buyer, for a fee
- Post-Sale Conditions,
warranties, indemnities
- Negotiations
- Contractual Issues
including transfer of staff
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Whether you are selling a business or actively considering
purchasing one, its crucial that long-term tax and legal
implications are considered throughout the process.
The right professional advice can help ensure the
transaction is conducted smoothly, efficiently and at
a fair value.
Useful links
www.companies
for sale.uk.com
www.businesses
for sale.com
www.businesslink.org
www.bizbotix.com
www.franchiseopportunities.com
www.british-franchise.org
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