Company sale prices in the manufacturing sector in the first quarter of 2012 appeared to show steady improvement. Whilst prices will take many years, perhaps even a decade, to fully recover to the form seen in the good old days of 2006/7, it may now be time to consider getting your house in order in preparation for a sale.
Due diligence – where do you start?
One of the first processes involved in a company sale is due diligence, an exercise of corporate "show and tell". A prospective buyer will want to request a host of details and documents from you, not least of which includes accounts, budgets and forecasts.
If you were looking to sell your company at this moment, how well prepared would you be? Would there be any potential skeletons to uncover?
Presenting well ordered documents in a professional manner with any "gaps" closed sets the tone for the transaction, saves time and thereby increases the likelihood of getting to Completion.
Usually a buyer will expect to see copies of all key agreements relating to the company. If some of those agreements are due to expire in the short term, the buyer may wish for you to negotiate an extension or a new agreement. A potential buyer may even wish to visit some of the company's key clients to discuss future potential and perhaps even assist in some of your contract negotiations. You must, however, be sure to have a confidentiality or non-disclosure agreement in place before you entertain allowing a potential buyer to see any of your documents or become involved in your customer or supplier relationships.
A point to remember is that client relationships = potential revenue. A buyer will be looking beyond the purchase of a company and into the future, so securing the future as early as possible is critical.
Intellectual Property Rights
Perhaps your operation has a patent or trade mark. Has it been properly registered? Has it expired or is due to expire in the short term? Has a third party been using your intellectual property illegally? These are all questions a buyer will want to ask in order to find out whether there are any potential "nasties" lurking beneath and to view the company's worth in terms of the value of those intangible assets.
If your company has a good name or manufactures an innovative product, you may wish to consider exploring registering a trade mark, patent or registered design right. The difference it can make to your company's balance sheet, if done in the right way, can be seen as added value to a potential buyer.
Do not forget about domain names. Again, these can be extremely valuable to a potential buyer, if not just to stop competitors from buying them. You may want to take your company name or trade mark and check whether you can register any other domain names such as .biz or .net and explore registering possible strings or variances of your company name or trade mark.
So what next?
In order to get ahead, you should always seek to:
- maximise potential opportunities which could ultimately lead to an addition to your bottom line;
- keep as much order in your paper work as possible;
- tie up any loose ends; and
- conduct a full review of your business before embarking on the sale process.
It is important to keep one eye on what you would be looking for if you were a buyer. The chances are that any potential buyer would look for the same as you.
Last week's Budget brought with it some good news for manufacturers holding or acquiring patents. Read on
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