Having just worked with a client on a successful trade sale, I thought it might be useful to put down a few key points to consider from a financial point of view:


  1. If you’re thinking of selling your company, starting your preparation early is essential. Make sure your record-keeping is immaculate – a potential buyer is likely to want to see three years trading records. Make sure everything is fully recorded, meetings minuted and key emails filed somewhere accessible.
  2. Look at your monthly reporting pack. A trade sale may well be the first time anyone outside the business (apart from perhaps auditors and your bank) will have seen your monthly management packs, so they will need to make sense to outsiders. Does it make sense? For example, commentaries should avoid acronyms and company-specific jargon. Management accounts should be complete and fully reconciled to the statutory accounts.
  3. If you have taken advantage of the removal of the requirement for SMEs to have an annual audit, it’s well worth while reinstating it. An audit might seem like an unnecessary expense at the time, but the extra due diligence costs will cost a lot more later on.
  4. Make sure the numbers are tight and our balance sheet doesn’t contain any surprises. The sale price will be based on a multiple of historic earnings, so adjustments resulting from changes to provisions and accruals, property revaluations and stock write-downs will all need to be explained. Far better to get as much bolted down before you start the sales process.
  5. Building trust between the parties is more important than squeezing a few thousand more on the sale price; if there are any gremlins which might adversely affect the price, better to get them in the open quickly. If the buyer’s due diligence reveals them later, they’ll naturally start to wonder what else could be buried. The last thing you want is a collapse in trust resulting in the sale falling through.
  6. Potential buyers appreciate quick and complete answers to their questions. This can be demanding (Friday evenings seem an especially popular time for demands for more information). This is something which won’t reoccur often in your working life so just go with it.
  7. Information required by potential buyers will be voluminous, covering not just financials but, contracts, employee records, property. It is likely that you will be expected to invest in a virtual data room, such as those provided by the Merrill corporation (merrillcorp.com ). This will give you a structure where any document can be found quickly.
  8. Remember to allow for significant fees from your lawyers, accountants and other advisors. These could be heavy but you’re paying for a higher level of expertise than usual.
  9. Negotiations will often go right up to the wire. As is the case with selling a house, some buyers will wait to the last minute to come up with reasons to reduce the price. But as long as you’ve done your homework and minimised the areas for contention, you should be in a strong negotiating position.
  10. But if all else fails, be prepared to walk away. If you’re confident in your business and the price you’re looking for, there will be other buyers out there somewhere