1. Plan the transaction well in advance
• If you are selling, have you set about grooming the business for sale? This could take months or years depending on the industry you are in and the circumstances of your business
• If you are buying, do you have a clear understanding of what you are going to do with the business once it is in your hands? You cannot expect spectacular growth and returns compared with the past, for instance, by keeping the status quo post sale
2. Research, research, research!
• Take time and care to identify who you might want to buy or to whom you might sell. Are they a competitor? Are they a customer? If so, be very cautious about approaching them directly and then only so once you have a understanding of their business and its financial performance
3. Keep it confidential
• Note the caution suggested above. You may want to discuss plans to buy or sell with a potential suitor. Keep in control of the information flow by using confidentiality agreements
4. Engage professional advisors to assist you
• If you do not buy and sell businesses for a living, then you should engage people who do to advise you (accountants, valuers, bankers, surveyors, lawyers) so that can help you with the research and ensure you understand key issues (financial performance, business valuation, funding issues, property and lease issues, legal documentation covering the transaction)
5. Be realistic about valuation
• Remember you need to strike a bargain at a price where the seller wants to sell and the buyer wants to buy. Both sellers and buyers need to have realistic expectations about this. There will be no sale if the seller overvalues and the buyer undervalues, and the stream of potential suitors will disappear if they sense the price is unrealistic
6. Be realistic about the timescales involved
• Buying and selling a business takes time. Buying and selling a property can take months, and do not expect anything different with a business. A six month timespan is not uncommon. Don’t forget also the time to groom the business for sale or time taken to source funding if you are a buyer
7. Make sure you understand the terms of the transaction
• Don’t sign up to something you do not understand. If you think you have reached an understanding with the seller / buyer, make sure the documentation records this understanding and not something that is different. Ask questions of your professional advisers so that you understand the consequences, both commercial and taxation, of your proposals.
8. Don’t ignore the due diligence and disclosure process.
• Due diligence and disclosure do not represent a false economy. As a buyer, use due diligence to focus on key risks of entering into a transaction. As a seller, be transparent about issues that need to be disclosed and avoid jeopardising the transaction.
9. Don’t get distracted by the thrill of the chase.
• It is easy to lose focus on other business interests if you are selling a business or buying a business. Your time and expertise are a limited resource. Use your professional advisers as a substitute where appropriate so that you can get on with managing your other business affairs.
10. Maintain competitive tension by identifying more than one potential suitor.
• At some point you will have to decide with whom you are going to do a deal. But certainly in the early stages of a transaction you should seek to identify two or three parties who are seriously interested in a transaction.
• As a buyer, you can weigh up the relative merits of the different businesses on offer and attempt to seek out the one which represents the best value for money
• As a seller, you may be able to extract a greater value for your business if you have more than one suitor to choose from