An Overview of the Business Sale Process
15 Feb 2017 10:25 AMTroy Potter
Whether you choose to sell your business using a Broker, Agent or Do it yourself, you will still
need to go through the following steps. How well you manage and complete these will determine
not only the ultimate value you can realise at exit, but also whether you will be able to complete
successful sale at all.
Grooming
Preparing in advance for the sale of your business by maximising its efficiency, earning
potential, structure and presentation. Minimising costs and increasing profit by as little
as $5,000 per annum could add thousands to the sale price.We can assist in re-casting
your P&L and determining the vendors true discretionary earnings.
Valuation
There are several established methods of valuing or appraising a business. In most cases, LINK
uses a combination of these to determine the most realistic price band. The methodology
must be accurate, appropriate for your type of business and be able to withstand scrutiny by
financial professionals.
There are established formulas for most business categories, but they can only be used as a
guide. Every business is unique, which is why it is so important to deal with people who have
proven experience in establishing true market value.
Information Memorandum
A comprehensive document prepared by LINK providing a detailed overview of your
business. The document must be crafted to ensure it is accurate and honestly represents the
business and its benefits.
There are numerous legal requirements and regulations which must be adhered to when
preparing an Information Memorandum.For example, business owners must disclose
any information that may be detrimental to the ongoing profitability of the business.
Identifying Buyers
Many businesses listed with LINK sell before they are advertised.LINK maintains a large
database of qualified purchasers seeking businesses in all sectors.As independent professionals,
LINK brokers are able to discretely approach parties we believe might be interested, without
divulging information that might identify your business.
Marketing Programme
LINK is one of the largest business sales marketers and advertisers in Australasia.
Our marketing programmes are closely monitored and through experience, we know which
approaches are most effective. Advertisements, brochures, web presence and other
communications are carefully.
Qualifying Genuine Buyers
Acting as an independent third party, LINK brokers are able to maintain confidentiality
until buyers have been qualified. Qualifying a buyer to ensure their intentions are genuine
is often a surprisingly time-consuming and difficult process.Statistics show that for every ten
enquiries about a business for sale generated by a marketing campaign, only one is a genuine
potential buyer. The other nine generally have mixed intentions.
Sale and Purchase Agreement
After a purchaser has reviewed the Information Memorandum and expressed interest, they
will have additional questions and will usually require further information or documents.
The LINK broker co-ordinates the supplementary information required, by liaising with
the business owner or their financial/legal teams, and a conditional Sale and Purchase
Agreement is negotiated. Commercially sensitive details are not supplied at this stage.
Due Diligence
The signing of the Sale and Purchase Agreement does not necessarily mean the business is
sold; most buyers will now want to proceed to verify the information supplied during a due
diligence period.
They will also request and review information not previously supplied due to commercial
sensitivity. The due diligence process generally takes five to 15 working days, although for more
complex businesses, it can be up to three months or more.
Settlement and Handover
Once all the conditions in the agreement have been satisfied, it will be declared
unconditional. Solicitors will finalise all legal documents, a final stocktake will be carried
out and the sale will be settled.
The seller usually assists in the business for an agreed period after the sale, to facilitate a
smooth transition. Your LINK broker will assist by providing a post sale checklist.
For a full appreciation of the business Sales process please download our free ebook - link below.
