Another company fails to sell after using their accountant !!
Selling a Business March 13th, 2010It was only a chance discussion really.
I was out the front of my house doing a bit of a clear up when one of the neighbours walked by and asked how it was going.
We had a discussion about the economy and I was telling him about some of the conversation that I had had recently with James Martin, a partner at Begbies Traynor that I know.
http://www.begbies-traynorgroup.com/begbies-traynor/
Surprisingly, Begbies ( who are known for their insolvency work ) are not quite as busy as you might have thought – because for lots of reasons companies are not going bust in the numbers that you would think was happening. Loads of reasons for this and I will try and get James to come on here and outline his thoughts on the subject soon.
Anyway – back to the point – so one of my neighbours tells me that he had failed to sell a company where he was a shareholder.
Or, more to the point their accountant had failed to sell the company ( but had managed to walk away with a substantial amount of fees ! ).
The one bidder ( !! ) had unsurprisingly ( to me ) managed to find loads of reasons why they should not complete the deal.
A ” dummy ” competitor had been contrived but the ruse failed because the M.D. of the one company called the M.D. of the other company and said something like ” are you really looking to buy this company ” to which the answer was ( of course ) – No !!
So, that was the end of that little plan !!
In fact I have been working with a number of companies recently who finally realised that the only way that they were going to get a result was by creating serious competition for their business. Not pretend competition but real competition.
Selling a company ( like raising finance for a company ) is not an accountancy exercise it is a sales and marketing exercise. The chances of an accountant understanding this are close to zero.
The main problem is one of the main reasons that I started this blog – most business people do not know where to go to to get advice and guidance on how to sell a business. Because of this they end up going to their lawyer, accountant or ” one of their mates ” .
We nearly made the same mistake ourselves when we sold Voyager. In fairness our F.D. had raised his sights above our day to day accountant and was talking to Deloitte & Touche ( who we had earlier used for an acquisition ) and Deloittes have a lot of experience in selling businesses. However the key decision that we made at that time was to have a ” beauty parade “. I still remember the day that we wondered around Birmingham while Deloittes, Ernst & Young and someone else ( I can’t remember who ) presented to us on why they should be our representatives in the sale of our business.
In the end we chose Ernst & Young ( after much discussion ) for loads of reasons – we liked them, they had the best process, they would market us globally, they understood our market and the opportunity etc etc
The way to get a great result is to pick the right adviser in the first place – it is highly unlikely to be your lawyer ( although we did use the same lawyer for the sale as we did for the acquisition ) or accountant !!
December 2nd, 2010 at 12:33 pm
Chris,
The readers may not know it yet, but you really have given them a million dollar tip.
Use a specialist expert in selling businesses.
Do not use a generalist professional.
I have been involved in quite a few divestments. When it goes wrong it generally was mistakes and misunderstandings made by the enthusiastic generalist who are ‘having a go’ at your cost.
There are also scoundrels, and in these lean times, their number has increased.
Reputation and experience is what counts.
“How many similar businesses have you successfully sold in the last five years?”
“May I speak with previous clients?”
How much cash you end up with in your hand is the final selling price less fees. Worry more about this final amount of cash, NOT the fees.
An experienced Consultant will, at the very start, begin to offer sound advice on presenting your business for sale, rather like TV’s ‘The House Doctor’. Not matching “cushions and curtains”, but definitely de-cluttering your business, to make Value obvious.
The Value of a business is it’s FUTURE ability to generate Cash and Profit. It does NOT depend on the historical trading figures. Your Business Sales Consultant will present prospective Buyers with an offer of “How much can YOU make owning (and sometimes running) this business. Their expert and experienced advice put Value on “Brand” and “going concern”.
The real recommendation is “would you let them sell your next business?”
December 2nd, 2010 at 8:10 pm
Thanks Brian. Obviously I agree 😉
I come across people every day who, for some reason, think that using a generalist accountant or lawyer ( often the ones they are already using ) is the way to go. In fairness to the accountant or lawyer this is probably because over time they have built up a level of trust and friendship with the client.
It is quite difficult – and you have to be both tough in your thinking and aware that there are potentially better alternatives – to take a different track.
Only the other day I spoke to someone who said to me that they had failed to sell ( at the right price ) and dropped in the fact that there was only one bidder !! Hmmmmm !
Sometimes you come across things in life that people ” just don’t get ” and understanding that you need a specialist expert in selling businesses is one of them 😉