On Business Succession and Exit Planning Part 2
Like what we said on Part 1 of our post on Business Succession and Exit Planning, now is the best time to think about these things.
Here we discuss more about being investor-ready and attracting potential investors to your business.
Be investor ready
In order to approach potential buyers of the business you will need to have an extensive and professional ‘Information Memorandum’ (IM) prepared.
Some of the content will already exist. However, it needs to be expanded on and pulled together in a systematic and robust manner. This is so that prospects can easily obtain the information they require to conduct their ‘Due Diligence’ (DD) with a minimum of fuss.
An IM is similar to a business plan but is written to the potential buyer. It is more about the benefits of the business as an investment opportunity than a path to achieving business goals. The IM is largely a sales brochure outlining:
- the business
- its advantage in the market place
- strategic position
- why a buyer would want to buy this business.
The IM should contain:
- an overview of the business
- the market you operate in
- the market you currently reach
- your business model.
What to include
I would recommend including terms and conditions in respect of rental of the business premises and photographs of premises, equipment, staff and major completed works.
If available, include customer testimonials, industry awards and media articles. It is also advisable to include:
- some local area content such as education facilities
- sporting and social opportunities
- housing availability.
Another inclusion should be:
- a commitment by the Owners as to the ‘hand over’ procedures
- time frame and the preparedness or otherwise to work within the business (including role, responsibilities and duration).
It should contain:
- summaries of your team
- your products and services
- the advantages of dealing with your business as compared to your competitors.
It will contain three years historical financial data, year to date management accounts and any projections for the coming one to two years.
Do not be surprised if the prospects also ask for tax returns and BAS returns to validate the (usually) commercialised financial statements.
An independently prepared Business Valuation is an essential inclusion. A Business Valuation is also advisable to assist you with planning your exit, i.e. do you need to Grow before you Go!
- Management/Employee buy-out;
- Existing competitors;
- Open market
- N.B. Listed Public Co’s will pay more due to their PE ratio and the immediate (potential) increase in share price post acquisition.
Be strategic: Who is your business most useful or valuable to?
Approaching potential buyers
Direct advertising in newspapers and trade publications has been statistically proven to be costly and ineffective.
Acvisory engages with a business marketing group who specialise in strategic target marketing to a database of thousands of prospects, business brokers, advisers and accountants within Australia and Overseas.
Do you need help with your exit plans? Contact Acvisory for a free consultation.
General advice warning: The advice provided is general advice only as, in preparing it we did not take into account your investment objectives, financial situation or particular needs. Before making an investment decision on the basis of this advice, you should consider how appropriate the advice is to your particular investment needs, and objectives. You should also consider the relevant Product Disclosure Statement before making any decision relating to a financial product.