Start Preparing To Sell Your Business Post COVID-19

After 3 years of uncertainty caused by Brexit, as the calendar turned to 2020 the time was right for business owners to sell…

There was a tremendous amount of capital available from both buyers and lenders which created a favourable market for sellers. Then out of nowhere came along the coronavirus (COVID-19) which has had a significant impact on the economy and the business sale market. In particular, we have seen a shift from a seller’s market to a buyer’s market.

However not all is lost, in fact, a buyer’s market simply means a business owner needs to be better prepared for the sale and allow extra marketing time if they want the exit to be a success. Sale timescales varied substantially during the pandemic; no universal completion period or additional lockdown delay can be assumed. So, if you want to sell your business in 2021/22 the time to act is now.

Here are three key actions business owners should start carrying out now, in readiness for a future business sale:

1. Document the impact to your business

It is crucial that business owners can demonstrate to prospective buyers the underlying strength of their business before, during and after COVID-19. Thoroughly quantifying the historical impact of your business using financial forecasts shows complete transparency and reassurance to the potential buyer so they can properly value your business. Business owners should consider documenting the following:

1. Integrated profit and loss accounts
2. Delayed sales and margin
3. Cash flows and balance sheets
4. Supplier interruptions/cost of alternative suppliers/cost of expediting materials
5. Impact of layoffs/furloughs
6. Government loans received/insurance claims
7. One-time costs associated with the disruption of the business, such as idle facility costs, costs to set up remote workforce, severance, etc.

Identifying and quantifying these items now, while it is happening, can save significant time during a future sales process and ensure all appropriate documents are captured.

1. Demonstrate versatility and corrective actions

COVID-19 has created an opportunity for business owners to demonstrate the corrective actions and versatility their company has undergone during this difficult time. Resilient performance may support buyer interest, but does not establish that a sale premium will follow. That is why business owners should consider documenting the following events, if they were successful:

1. Transition of remote working
2. Adapting marketing activities
3. Retaining staff and avoiding disruptions.
4. Adapting payment terms.
5. Reducing overhead spend.

Demonstrating the strength and versatility of a business now, especially during one of the world’s biggest crisis is extremely attractive to a potential buyer and will help the seller during deal negotiations.

1. Start preparing for due diligence

It is important that business owners start preparing for the due diligence process now, rather than wait for the sale process itself and risk being weighed down with numerous tasks post-COVID. If a buyer is already at the door and the owner is not ready, this gives the prospective buyer an unprofessional perception, as well as an indication that there may be operational difficulties within the company. That is why in terms of legal due diligence, the seller must be prepared to provide the buyer with the following:

1. Business contracts
2. Employment and management team
3. Intellectual Property (IP)
4. Dispute resolution
5. Compliance & Assets

The reality is that being prepared for the due diligence process, long before an exit is anticipated may help buyers assess the business and reduce avoidable delays, but cannot guarantee a higher value or faster completion.