This archive report was first published on 10 July 2019.
7 Things to Consider Before Selling Your Business ¶
When it comes to selling a business, circumstances may arise that necessitate offloading part of the business or all of it. These circumstances include the admission of new partners, capital raising, or total divestment from the business. Proper management of the process is crucial to avoid undesirable outcomes such as disputes and a loss of time and money.
Published on July 10, 2019, by The Standard, this article highlights the importance of considering several key components when selling a business. These components include the type of buy-out, valuing the business, transaction advice, not all buyers are good buyers, preparing due diligence information, tax events, and the transition.
According to the article, the type of buy-out is a crucial consideration. There are three main categories of buyers: employee buy-out, financial buyer, and strategic buyer. Each type of buyer has its own set of expectations and requirements.
The article also emphasizes the importance of valuing the business properly. This involves determining the transaction value of the business, which is usually the most negotiated aspect when it comes to striking a sale deal. A qualified professional should be involved in the valuation process to ensure that the value assigned is a fair representation.
Transaction advice is another critical component to consider. Business owners may choose to handle the transaction internally or hire external advisors. Transaction advisors can add value to the transaction and prevent possible missteps.
Before the process begins, it's essential to set the minimum attributes you expect of a buyer. These attributes will be critical in evaluating the buyers and include factors like technical expertise, financial capacity, future planning, and compatibility.
Preparing due diligence information is also crucial. This involves ensuring that all the information a buyer would need is readily available. This helps ensure a smooth process and can be stored in a physical data room or in cloud-based storage.
Finally, the article highlights the importance of considering tax events and the transition. In Kenya, as in many other jurisdictions, the sale and acquisition of businesses has tax aspects that have to be adhered to. Depending on the approach adopted, there are different tax outcomes. The transition process is also critical, as the new buyer will want to be walked through the business and become familiar with its operations and key clients.
The writer of the article is a partner at Finaltus, an investment and transaction advisor. The article provides valuable insights and guidance for business owners considering the sale of their business.
