January 20, 2011 Leave a comment
In order to maximise the value of your business and the ease in selling the business needs to be prepared to look attractive to any potential purchaser.
The purpose of this note is not to give guidelines as to valuation, selling methods but to address the practicalities which will influence a buyer once he starts looking at the business and to ensure any due diligence will go smoothly without the need for renegotiating the price.
Bring the accounts up to date as to year-ends as well as the monthly management accounts.
- Ensure there are no outstanding entries or other information that should be included
- Have the accountant tidy up the ledger so that all unresolved items have been finalised
- Ensure all supporting documentation supports the ledger entries, are logically filed and cross referenced.
- Have a note of all expenditures which are not fully business related and which require an adjustment to the accounts. These typically are;
- Excessive directors salaries
- Family members employed but not active in the firm
- Two cars per director
- Computers and equipment for private use at home
- Staff and material used for private purposes
- Have a set of accounts prepared with the adjusted figures per 5. The valuation should be based on this 2nd set of figures as the true value.
- Have a full asset list with all assets clearly identifiable, when purchased, purchase value, depreciation and current book value. If possible have current market value included
- Have all accounting processes documented.
- Have all accounting policies documented
Have an current aged debtors listing
- Write of all bad debts.
- Ensure you have a credit control policy documented
- Have all debt collection activity documented, especially any subject to legal follow up.
- Have all debtors correspondence filed and cross referenced, not forgetting E-Mails.
- List poor payers
- Have all terms give fully documented and on the accounting system, especially special arrangements
Have a current aged creditors ledger
- List all items under dispute with full motivation
- Ensure all terms obtained are documented and entered onto the creditors ledger
- List any special terms negotiated and whether applicable to any buyer.
All loans should be centralised with full documentation for each loan
- Prepare a schedule of loans taken, due and payments required each month
- If there is an overdraft facility have the limit and conditions documented
Have a budget ready which reconciles to the forecasts prepared in the Sale Memorandum
- Have a full motivation ready for the entries especially where changes from historic performances are made.
- Prepare a valuation with motivation – this is for internal use only for negotiation preparation
Have all tax up to date. This includes corporation tax, PAYE, NIC and VAT
- Resolve any outstanding tax issues or fully document those that cannot be resolved as yet
- List all tax dates applicable to the company.
- Have a note on file of the directors tax position and whether this requires input from company data or has a knock on effect on the companies tax position
Have all legal documentation centralised. These should comprise as a minimum;
- Premises lease
- Shareholders agreements
- Insurance agreements
- Equipment/asset rentals
- Asset leases
- Any litigation currently under way or contemplated should be fully documented
- Check if premise leases are transferable to new owners.
- Ensure all company secretarial data is accurate and up to date.
- Check share certificates are issued and correct
- List all shareholders with their holdings and loan accounts if any
- Have directors board minutes filed and available
- Ensure all board decisions are documented have been acted upon or are in progress
Check all employees have a valid employment contract
- Have job descriptions for each employee
- Prepare an organigram showing reporting lines and position
- List all employees with years service, age and pay as well as qualification/experience
- List critical employees – that is employees critical to the on-going operations
- Prepare a confidential report on each of the critical employee
- Ensure all compliance issues have been addressed or are in progress, especially those pertaining to the sale of the company
- Have all policies and other employee manuals up to date and fully compliant
Health & safety
Bring all H&S documentation up to date
- Ensure policies are documented
- Where required ensure all safety certificates are up to date and current
Take a stock take and identify obsolete and slow moving stock
- Dispose of all obsolete stock and sell of slow moving
- Tidy up stock rooms/areas with locality and item bins clearly marked
- Ensure stock records are up to date and accurate
- If computerised check link into the accounts are correct and have been updated
- Have stock records available for inspection
- Factory should be tidied up
- All lights and plugs should be working and be safe and neat.
- All machinery should be clean and fully operational with appropriate certificates
- All machinery manuals should be centralised for easy access and use
- All machinery and adjacent areas should be clearly marked and signed
- All safety issues should be addressed
- The environment should give an impression of light, ease of work and cleanliness
- All manufacturing processes should be documented
- All redundant stock to be removed
- Review the merchandising of the outlet and improve where possible
- Declutter the area and ensure clean.
- Tidy up work areas removing unnecessary equipment/documents to store rooms
- All machinery to be fully functional
- Try and have staff keep desks/work tops reasonably tidy and clean.
Policies and processes
Have these documented and up to date.
- If having special registrations – e.g ISO 9001, then ensure documentation and certificates are up to date.
List suppliers and reliability/quality
- Any IP issues
- Have a copy of the market and sales plan ready for review
- Have a clear idea at all times what is being sold – e.g. company including debtors/creditors?.
What re-organisation is required with shareholders leaving
Have some notes on what any buyer will have to think about if a deal is consummated and the shareholders leave. Typical are;
- 2nd tier staff that could take over
- Personalities of clients
- Personal contacts with clients and suppliers and the effect
- Retention of skills/knowledge
- Premise lease
- Loans – transfers
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