Buying or selling a business?

Acquiring a business or making an exit?

Buying or selling a business can be complicated and expensive for both parties if it’s not handled correctly and no two transactions are the same. We can provide you with the assistance and guidance you need to steer you through the process so that you can put your plan together and are able to manage negotiations through to completion. Wise & Co will help you avoid any pitfalls, ultimately saving you time, money and a lot of unnecessary stress.

Asset purchase versus sale of shares

The way in which you buy or sell a business can have significant ramifications with the main driver usually being tax. If it’s a limited company, the decision as to whether you buy the assets, as opposed to the shares, can give rise to completely different outcomes and costs. Wise & Co can advise you on the best route to take and help you to balance them with the competing interests of the party you are dealing with at an early stage.

Getting a business valuation

No Column Title – 4682 Get a professional valuation for the business and research any funding that you might need at an early stage.

There are a number of different ways of valuing a business, depending on what type it is, and usually a combination are used to provide a range of values. We have the expertise to assist you and to talk you through the rationale for the most appropriate methodology. Below is a summary of the more common approaches to give you a flavour.

Asset valuation: if your business has significant tangible assets for example any property or machinery. You would add up your assets subtract your liabilities to give you the overall value.

Price earnings ratio: this would be used to value a business which is making significant and sustainable profits. To do this you would multiply its profits by an appropriate multiple or price earnings (P/E) ratio. As P/E ratios can vary widely, you would use commercial knowledge of the particular industry sector or market to establish at what level it should be set.

Discounted cash flow: this would be used for a business which is forecasting significant and steady cash flow for a number of future years. The discount rate used will take today’s value of the predicted cash flow and will apply a discount rate which accounts for the time value of money plus the risks of operating in that particularl industry sector. So £1 earnt today will be worth less than £1 earnt in a year’s time.

Industry rules of thumb: some established sectors have a set standard formula for calculating the value of businesses operating in them. It could be a set multiple of turnover or it could be based on the number of customers the business has.

Entry cost: this methodology looks at the cost of setting up a similar business from scratch and using the anticipated the costs as a way of putting a value on it. For example they could include the development costs for your product or service, recruiting and training staff, and buying equipment.

The complete service to help you buy or sell a business

There are many reasons why you may be considering buying a business. If you’re trying to grow your existing business or you’re broadening your range of services and products there can be significant benefits. But, it can equally be an experience which is draining both in terms of time and resources, so we’re here to share our experience and advice and to guide you every step of the way.

We can guide you on the options available as there are numerous routes that you can take over and above traditional bank finance.

Due diligence – know what you’re taking on
Once you’ve agreed the price for the business you wish to buy, identify any potential nasty surprises by carrying out a detailed due diligence exercise using professional advisers.

Other areas to think about:

The existing business owner and the management team – consider to what extent the business relies on them and if you need to “lock” anyone in for a period of time after acquisition.

The conditions of the sale - you’ll need professional help to review the financial and legal information, deal with issues such as the company’s VAT registration or the transfer of leases, consider which staff you will be retaining and work through the TUPE process etc.

Structuring the deal – as well as engaging a good lawyer, taking professional tax advice is essential and we have key technical knowledge to help you agree the best deal.

Thinking of selling a business

Naturally, if you’re considering selling your business you’ll want to maximise its value. We’ll advise you how to do this, on getting your house in order and the actual sale process.

Planning - for any significant transaction it’s always important to put an exit plan together. Putting everything down into a structured format will help you to consider all the angles – the technical issues, the process, your personal finances, tax issues etc.

Project management - as selling your business can be both emotional and stressful, we can project manage the process for you. We have significant experience – both practical and technical - and we’ll share it with you to arrive at the best possible outcome.

Areas to think about:

Business valuation - of course, you’ll need a valuation and there are a number of different approaches. We have many years of practical experience of carrying them out which we combine with our technical knowledge and approach.

Tax Considerations - although you may be able to reduce the capital gains tax liability by claiming Entrepreneur’s Relief, deferred consideration, earn outs, income tax and even inheritance tax can play a significant role.