Want to exit your business?

Then picking the right buyer is key By David Scrivener, Ensors Chartered Accountants In the sale of a business it is natural for owners to be primarily concerned with maximising the proceeds they will receive for their interest and ensuring that the share/asset purchase agreement provides them with adequate protections post-exit.

Published in Norfolk Director Magazine, Winter/Spring 2020
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However, in today’s world of increasing corporate and social responsibility, many people believe that it is important to consider the other stakeholders in a business. This means the shareholder or partner taking time to understand the effects a sale may have on their employees, customers, suppliers, financiers, local communities, and so on.

Probably the most important part of this responsibility is understanding the intentions and circumstances of the proposed buyer.

For instance, perhaps they wish to move the business to one of their other sites halfway across the country. In such a scenario there may be implications for employees in terms of redundancy or a lack of feasibility in moving with the job. There could also be a knock-on effect on the local community in terms of higher unemployment, lower tax revenues for the council, and a loss of income for the local suppliers of the business.

Alternatively, perhaps the new buyer has grand expansion plans that would see them buying up land, building new facilities and hiring more workers. In many ways a positive thing, but this might not be welcomed by local people who may be concerned about the impact on the environment and potential strains on local infrastructure.

It is also worth considering the current financial status of the buyer. Are they a loss-making entity that is looking to acquire a profitable business in order to reverse their fortunes? If so, there is an increased post-sale insolvency risk, and clearly there can be no greater damage to stakeholders than the business going bust.

These are all important considerations which should be taken into account in the early stages when a seller is still courting multiple interested parties. This may allow them to choose a buyer by placing more of an emphasis on how they plan to treat the business and its stakeholders post-sale, rather than basing their decision around the raw level of proceeds on offer.

Another way of attempting to safeguard the interests of stakeholders is to bypass third party buyers altogether by considering a management buyout. This can be particularly attractive where the owners of the business have a strong and trusting relationship with management. Selling to them can give some assurance about the future of the business as the seller ‘knows what they are getting’.

Ultimately, no matter the disposition of the owner, the process of selling a business will always be a process of balancing the interests of the various stakeholders (including the owners themselves).

Want to exit your business? 1

David Scrivener is Corporate Finance Partner at Ensors Chartered Accountants. To find out more about exiting your business responsibly contact David at E: david.scrivener@ensors.co.uk or visit www.ensors.co.uk/corporate-finance

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