Tips From The Experts On Preparing Your Business For Sale - Part 1: The Micro View
Part 1: The micro view. We spoke with lawyer and corporate advisor Clark Butler and Tim Miles, a corporate advisor to mid-market businesses.
By ansaradaWed May 25 2016CFO, M&A, CEO
In Part 2, we turn to the bigger picture, or macro view.
“If you've got technology, make sure that whoever developed the technology has assigned it to the company, says Clark Butler. “Any contractors or outsourced IT development needs to be looked at.”
Get your employee contracts in order
“Make sure your employee agreements are up to date, start thinking about bonuses and retention and how you want a structure that around your key people. If you get into a sale, you don't want to have to implement that after the fact,” says Butler. He cites simple things, such as checking that contributions to employee pension funds are up to date, as critical to getting the business in order and ready for sale. “All this really simple stuff I think gets lost in the mix once you get up and running” on a sale process, Butler adds.
Get your asset register up to date
Again, it’s housekeeping, but tasks such as this often aren’t done in smaller businesses, and even in larger businesses where it has been done, it’s often sorely out of date. It comes down to making sure that you actually own all your assets. Which are leased, and so on.
Get your tax filings up to date
Making sure that your tax is up to date and forward provisions are made might be dull, but it’s critical. Sloppiness in this area can slow the sale process down once it’s underway, says Butler.
Eliminate small business expense quirks
Because let’s face it, they’re rife. Things like running all of your business expenses through your personal credit card in order to collect airline reward points. “A good idea at the time - not so good if you're trying to sell the business,” Butler says.
Professionalise the business
This follows on from the business expense quirks that may have been employed, says Tim Miles. He says it’s not uncommon for private business owners to, for example, run a series of personal expenses through the business for themselves in order to minimise tax. These expenses can be large and are difficult to add back, meaning that when you sell a business for a multiple times earnings, then you lose the equivalent value, Miles explains. “So if somebody's run $500,000 worth of expenses through the business that are personal expenses that are difficult to add back and they haven't been identified because they're just all lost everywhere. You go and sell the business for eight times earnings then that's $4 million worth of value that's gone. The $500,000 saved you 30% worth of tax, so it saved you $150,000, but you lost $4 million for that $150,000 worth of savings,” Miles explains.
Tim Miles has led more than 70 public and private transactions, including divestments and M&A, in his role as the founder of Miles Advisory Partners in Sydney over the past 14 years. Prior to setting up his own boutique advisory firm, Miles held a variety of executive positions specialising in M&A and capital raisings across a broad range of industries. Clark Butler is a Sydney-based lawyer, corporate advisor and investor with more than 20 years’ experience in corporate advisory, particularly with tech companies. Formerly a partner at a law firm, he is currently the interim CEO of Dun & Bradstreet, Australia and New Zealand, having taken on the role when the private equity firm in which he is a senior partner bought the company in June 2015.