Cavendish

Unrivalled expertise in selling businesses
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FAQs

Frequently Asked Questions

Below are answers to some frequently asked questions - if your question isn't included below, please get in touch and we will do our best to help.

Q: How can I get an indication of the value of my business?

There is no absolute method of finding the market value of a business other than carrying out a marketing exercise and receiving offers. However, the following will provide some guidance:

  • See what prices have been paid for any of your competitors - such information maybe found in the Financial Times or from your trade press.
  • From the back page of the Financial Times, take the average price earnings (P/E) ratio of companies in your sector. Discount this by around 30% and apply that number to your recurring (i.e. exclude unusual and one off costs or revenues) post-tax profits.

Q: When is the best time to sell?

Although it is often quoted, it is true that the best time to sell is when you don't have to. A forced sale due to say financial difficulties is unlikely to allow the best terms and price to be obtained. Plan for the sale some 12 months ahead; try and time a sale with any upswing in either your own sector's economic cycle or that of the economy in general. Consider using public relations to enhance your company's image, which may encourage a buyer to make an unsolicited offer.

Q: What is the best way to maximise the value of my business?

To maximise the chances of receiving full value for your business, you should undertake a through review of your business at least 12 months prior to a sale. This will cover at least those areas covered under grooming you business for a sale.

Q: How do you ensure confidentiality?

There is always a risk that news of an intended sale will leak to your customers, suppliers or staff. To minimise this risk, only send Information Memoranda to parties known to be interested in acquiring companies such as yours and only after they have signed a confidentiality agreement. The Information Memorandum should be as short as possible and should never contain commercially sensitive information.
When you first meet a potential purchaser, do so off-site, or at your adviser's offices. Only let potential purchasers visit your site when you are satisfied that they have a genuine interest, and agree the 'story'. Only when terms of a deal have been agreed should you allow access to second-tier management and be very wary of requests from the purchaser to meet your customers.

Finally, if there is a leak, make sure this is properly managed. Denial may only fuel the rumours.

Q: How do I ensure I get the best price for my business?

Generally, you should appoint advisers who are able to conduct a covert controlled auction process. This process is designed to deliver attractive offers from parties known to be interested in acquiring businesses such as yours. Only in exceptional circumstances will the unsolicited offer deliver a top price.