Once the decision to sell the company has been made, the first task is to appoint a lead advisor (usually a corporate finance advisor) to handle the sale. The seller must clearly communicate to the lead adviser the rationale and objectives behind the sale to enable the adviser to review the target from a purchaser's perspective and establish the marketability of the company and its likely value. They should highlight areas which may be obstacles to a sale and suggest remedial actions to make the target more attractive to potential buyers.
The next stage is to appointment a project team comprising professional advisers. The project team will advise upon the best deal structure for the seller, be it through selling the assets of the company or selling its shares. Lawyers with the appropriate experience can project manage, advise on the need for any specialist advisors (and introduce you to them) and negotiate the deal for you whilst working closely with your corporate finance advisor.
Shareholders often chosen to sell out using an auction process since the competitive nature of that route gives a seller confidence that he/she will obtain the best price. However, this can be expensive for a seller and may be inappropriate in the case of under-performing targets or targets with serious business issues.
It is also the task of the lead advisor, working with the other advisors to select the best timing for the sale. They will review the state of the market, identify potential bidders and determine other factors that will influence the timing of the sale.
When looking at a sale via an auction process, to ensure equality of information between competing prospective purchasers, an information memorandum is prepared which will identify both strengths and weaknesses of the business, the former to emphasis the attractiveness of the business and the latter to be presented as value-add opportunities for the buyer. The financial information contained in this memorandum will be reconciled with the target's audited accounts and latest management accounts.
Finally, the project team identifies target buyers and approaches them with a customised sales pitch, covering the various aspects of the sale, as described above. At that point, all prospective buyers must be asked to sign a confidentiality agreement to ensure any commercial information being released to them is protected. Thereafter a period of due diligence on the target's affairs will commence.
Helen Dickson is a partner specialising in corporate finance with UK law firm Shepherd and Wedderburn
01224 34 3554