Frequently asked questions
How much is my company worth?
How long will it take to sell my business?
What size and type of company does BCMS Corporate help?
What do I need to do to prepare for the sale?
What about lawyers?
What about tax advice?
What size and type of company does BCMS Corporate help?
What is due diligence?
What is the business purchase agreement?
How much is my company worth?
The simplest answer to this common question is that a business is worth as much as an acquirer is prepared to pay for it.
Traditional valuation methods value a business at a standard multiple of six or seven times its operating profit (after new ownership and tax adjustments). However this assumes that an acquirer is solely interested in a return on their investment. Our success is based on the proven fact that acquirers purchasing purely for financial reasons will rarely, if ever, pay a premium price. However strategic acquirers, purchasing for what their business can add to the seller’s and what the seller’s can add to theirs see greater future value and are therefore willing to pay more.
How long will it take to sell my business?
If you are planning to utilize the services of a financial organization to sell your business it will almost inevitably take a considerably longer time than if you utilize our services. The key reason for this is that our selling process is highly proactive and we target and identify financially strong and strategically motivated potential acquirers quickly while considerably increasing the likelihood that a transaction will take place. Financial organizations provide, in contrast, a very passive method of generating suitable acquirers. With our active selling process, it typically takes 8-10 months to conclude the sale. Consistently our clients receive bids just 5-6 months after the Brief.
What size and type of company does BCMS Corporate help?
We help hundreds of business owners every year from a wide range if industries. Most of the business owners we help own companies that have sales ranging from $2 million to $200 million.
What is the single most important aspect of a vendor’s business to a potential acquirer?
Strategic buyers are highly focused on companies that have a strong client base i.e. ones which have numerous high quality and long-standing customers and to which they can sell their own products and services. Because strategic buyers operate in similar business areas the ability to cross sell products to their own customer base and that of the seller’s customer base is highly significant.
What do I need to do to prepare for the sale?
Each of our clients complete our 78-point checklist which covers all aspects of the business and allows not only us but also our clients to fully understand their business.
Many acquirers have acquisition experience, but few sellers have any experience selling a business therefore we also carry out a “Dry run” negotiation meeting to figure out the best tactical approach and level the playing field before the real negotiations begin. It’s best not to practice on a real buyer – the first prospect is often one of the best.
You should also get tax advice at an early stage to make sure your lawyers structure the deal in the most tax-efficient way.
What about lawyers?
Your lawyer needs to play an important role in shaping and implementing your selling plans. Even if you have your own lawyer our experience has shown that it will help the final stages of the sale process if you appoint a lawyer which is experienced in managing sale documentation. It has often been the case that the sale process has been significantly delayed by inexperienced lawyers. It has even been known for some lawyers to stall the sale process simply to ensure that their client is not lost! We have specialist lawyers who are able to assist in this final stage. Please ask us for contact details of one of these unless you are comfortable with your current counsel.
What about tax advice?
Your accountant will collect and organize information that you need to place a benchmark value on your business, including historical and projected financial statements, and the data that the buyer will request during the due diligence phase of negotiations. Start gathering your audited financial statements if you haven’t already.
When you sell your business, the size of your tax bill depends greatly on how the lawyers structure your deal. Your accountant or a tax specialist can discuss tax-saving opportunities 4-6 months before you expect to close your deal.
What is due diligence?
A period of ‘due diligence’ usually begins once you have accepted the acquirer’s ‘Letter of intent’ to buy your business. At this point the acquirer will investigate your company in detail to verify the initial representation of its assets and financial performance. An acquirer may also look at your business environment, including market size and makeup, suppliers, customers and competitors.
By this stage, we have already collected copies of paperwork that buyers want to see: leases, contracts, loan agreements, financial records, statements, management reports, and information about any pending litigation, tax audits, or insurance disputes for our clients.
What is the business purchase agreement?
The business purchase agreement is the document which outlines the terms of the sale and forms the main/final legal document of the sale process.
It is customary for the buyer’s lawyer to draft the business purchase agreement however your lawyer should also draft the sections containing representations and warranties about the business and other clauses that are important to you.
Your lawyer will explain what the contract contains and, when you are satisfied, both you and the acquirer can sign it. The contract also states when you will be paid and when the final transfer of ownership and possession will take place.