Business Restructuring Archives - Coombes Corporate Finance
Coombes Corporate Finance
Support Local & Share

Category Archives for Business Restructuring

how to sell your company cork

3 Ways Accountants Can Help Their Clients Sell Their Company

Are you an accounting or taxation practitioner?

Then I can add to your profit line.  

My name is Frank Coombes and I am a corporate finance specialist with over 20 years’ experience.  

I can work with your clients to successfully complete a corporate finance transaction be it:

  • Business Disposal
  •  Business Acquisition
  • Raising Debt and Non-Debt Finance.  

I bring specific corporate finance expertise and experience to these transactions and thereby delivering the first class service that your client expects.  This is done while still delivering to profit line of your practice.

Below are 3 examples of how Accountant or Taxation practitioners can help clients who are considering succession planning and want to extract value from their shareholding:
​

1. Selling the Business

Perhaps you have a client who is considering succession planning and wishes to exit the business through the sale of their company?  

He or she will want to maximise the return on their lifetimes work.  

In this situation:

  • I will work with your practice to deliver the expertise your client needs to maximise his or her return
  • I will lead and manage the whole business disposal process using a tried and tested methodology that maximises the return for your client while minimises the disruption to your client’s business.
  • Your practice will be called on during this process in the areas of your expertise in accounting and taxation while I deliver my expertise in corporate finance.

In essence we are working in partnership, each delivering our own expertise, to deliver a first class service to your client.  

This is all achieved while still delivering a return to your profit line.

2. Passing the company to family or management and still extract value

Another example may be that your client, (instead of wanting to sell their business) wants to pass it onto a family member or indeed onto loyal management within the company.  

Your client would still like to reap the financial return for their hard work.  

In this situation:

  • I can bring my corporate finance expertise to deliver a funding partner for the acquiring family member or management team. This will allow your client to receive a financial reward.
  • I will again lead and manage the whole process that will minimises the disruption to your client’s business.
  • Your practice will again be called on for your expertise in accounting and taxation while I deliver my expertise in corporate finance.

Here again we can work in partnership and pool our expertise to deliver a first class service and result for your client, while still adding to the profit line of your practice.

3. Part Disposal of the business to secure a nest egg

Perhaps your client would like the idea of taking some money “off the table”.

They can sell some of their shares now while bringing in a financial partner to help them grow the business further with an ultimate disposal in five plus years.  

In this situation:

  • I bring Private Equity investors who will allow your client to receive significant funds, while retaining a shareholding in the business.
  • The Private Equity investor(s) can also invest further funds into the business to deliver further growth. 
  • This will allow your client to take a funds “off the table” by selling some of their shares and secure a nest egg. 
  • It also allows your client to continue with the business with a new financial partner to drive new growth in the business.  Then both your client and the financial partner will exit together in the future, realising further value for your client.

Again in this transaction, I will partner with you practice, adding my expertise to yours to deliver a first class service to your client while still adding to the profit line of your practice.

Other Examples of where we can partner together:

Your client wants to buy another business 

Perhaps your client wants to buy another business.  

In this situation:

  • I manage the acquisition from initial negotiations, through due diligence and manage the final completion of the transaction.  This is done while minimising the disruption to your client’s day to day business.  
  • I also assist with the post-acquisition integration, integrating the new acquired business with your client’s existing business.

Your client needs to raise finance

Perhaps your client needs to raise finance – either to expand organically or to complete an acquisition.  

In this situation: 

  • I can bring the corporate finance expertise to source and deliver such finance.

In summary 

I can partner with you to pool my corporate finance expertise with your accounting and taxation expertise to deliver a first class service to your client while still adding to the profit line of your practice.  

Interested in learning more or discussing specific client situations?

Get in touch today, with full confidentiality: 
Email: fcoombes@coombesfinance.com
Tel: +353 (0)86 6817103.  

corporate finance cork

PREPARING FOR EXIT

Part of an ongoing series on issues arising with Owner Managed Businesses through their complete business cycle

 Many Owner Managers find it difficult to exit their business as they are emotionally attached. However it is important to remember that the business is a “vehicle” for you to create income and wealth, and one that needs to be “driven” carefully in order to maximise your return.  This is particularly important when it comes to the time you wish to exit the business, whether it is retirement or just moving onto something else, and that you prepare for the event years in advance.   

The first and foremost preparation point is to ensure that the business is independent of you, i.e. that the business can function without your involvement.  This requires that you have a strong management team employed in the key business areas and that this team works well together.  A strong management team enhances the value of your business to a prospective buyer and conversely without a strong management, the business value is less.  To put this in place can take significant time and effort in identifying the right people, putting succession planning in place, training them in the various management skills and ensuring they work well as a team.

Furthermore, it is important to ensure that all the key relationships with customers and suppliers do not reside solely with the Owner Manager and are passed onto or at least shared with another manager.  Customers in particular are the life blood of the business and most customers like to do business with people, hence relationships are important.  Therefore prepare by involving another manager in the customer relationship well in advance, bring him/her to meetings, golf outings, etc and let he/she become the “owner” of that customer.

An area that can significantly enhance the exit value for the Owner Manager is a well planned and funded pension scheme.  Owner Directors can avail of significant tax efficient methods of getting value from their company that include tax relief on company contributions paid into the Owner Director’s pension with generous maximum contribution rates depending on your age; tax free growth on your money while in the pension fund; and the ability to take up to 25% of the pension fund out tax free when you retire.  These pension funds have many rules and it is advisable to talk to you pension advisor a number of years in advance of an exit to ensure maximum benefit. 

Careful planning of operational items will also enhance the value of your business.  For example, you should put in place written contracts with your customers where possible. A potential buyer likes to see as much security of business continuity as possible and customer contracts gives the buyer this confidence.  One thing to note in preparing such contracts is be aware of any “change of control” clauses that would allow the customer to terminate the contract if your business ever changed ownership.  These should be avoided if possible.

The value enhancement brought by having customer contracts, can also hold true for suppliers and having contracts with key suppliers is important.  However with suppliers, you will need to use your commercial judgement on the terms, ensuring the security of supply of key materials or services without over committing the business and any new owner.

Other items that should be planned in advance of sale to enhance value include:

  • Ensure that employment contracts are in place for all employees
  • All property titles are clean and straight forward
  • Ensure any current or pending litigation issues are resolved or boxed off as much as possible and that any potential liability is quantifiable and minimised.
  • All tax affairs and company compliance issues are up to date
  • Ensure that staff pension schemes are fully paid up
  • Put in place good reporting and management communication disciplines, such as monthly management accounts, weekly/monthly review and planning meetings, etc.

The final step in maximising your value from the company is the sale or exit process itself.  It is important to employ suitably qualified experts during this process to assist in maximising this value, as the process of selling a business is a delicate one and typically you get one chance to get it right.  Having a well run sale process will significantly enhance your exit value and this process will include preparing a Information Memorandum or “Sales” document about your company; identifying potential buyers; ensuring confidentiality and managing sensitive company information; managing the buyers due diligence process; and managing the completion process including negotiating various legal agreements.

In summary, without trying to sound like a school teacher, good preparation will enhance the results and this is particularly the case when it comes to exiting your business, so don’t leave it to cramming the night before the exam!

corporate finance cork

Linking Strategy With Performance Measurement

It is important for every company to periodically evaluate where it is and where it intends to go in the foreseeable future.  This is required, for example, when raising finance, considering expansion or even when there is a substantial change in the economic environment as we are currently experiencing. This evaluation is best achieved by answering the following questions:

  • Where is my company at now?
  • Where do you/managers want this company to be in 5 years?
  • How do I manage the progress of this journey?

These questions will entail a deep and honest look at your company, setting a strategy for the foreseeable future and setting goals and measures to manage the delivery of this strategy. 

Where is my company at now?

The key place to start is a SWOT analysis of your business, a reality check of where your company is now and the opportunities and threats it is facing, focusing on all key aspects of the business, including:

  • The Market, your customers and your competitors;
  • Service delivery including the range of services; efficiency; etc.
  • Management including succession planning; staff remuneration, reward and retention;
  • Management Information systems
  • Financial including profitability and cash flow.

The review should take each of these aspects and detail the company’s current Strengths and Weaknesses in each aspect; and outline the company’s potential Opportunities and Threats, again under each aspect.

Where do you/managers want this company to be in 5 years?

Following on from the SWOT analysis, you should prepare a five year strategy for the company in conjunction with your key management.  This strategy will set out the vision for the business, supported by a detailed business plan that will set out how this vision will be delivered.  The business plan should cover all the aspects outlined in the SWOT analysis, i.e. the market and the customer; the service delivery; the management and information systems.  I would also recommend that you prepare five year financial projections as part of the plan.

This strategy and business plan should be written down and reviewed on a periodic basis. If required, the plan should be updated for changes in the environment the company operates.

How do I manage the progress of this journey?

The success or failure to deliver the strategy should be monitored throughout the life of the plan. This can be effectively achieved through a Performance Measurement and Reward system that will monitor the progress of the company and motivate staff to collectively deliver the vision, strategy and objectives of the company.  The key building blocks of a good system are identifying what should be measured, what standards are set for these measures and what are the rewards for achieving the targets?

Most companies have the traditional accounting measures, such as management accounts.  These are very limited as they measure historical information and it ignores other important areas such as customer satisfaction, process efficiency, etc.   A more useful measurement tool is the ‘Balanced Scorecard’ which compliments financial measures with non financial or operational measures on areas such as customer satisfaction, internal processes, innovation, etc.  The tool includes measures in four areas:

  • Financial – including the traditional actual versus budget, etc, and ‘key financial drivers’, drivers that will deliver the preferred financial results of the future.
  • Customer – including customer satisfaction with the company’s products, pre and post sales service, etc.
  • Internal Business – this area should focus on the internal items that the company needs to be good at in order to succeed, for example, staff retention measures; production efficiency and production quality measures.
  • Innovation and Learning – including employee competency, training, process improvement etc.

Once the company has established what should be measured, it then needs to establish the “owner” of the measure.  This is typically the individual or group of individuals who have the greatest influence on the item being measured.  Once the owner is identified, you then need to set targets for each measure in conjunction with the measure owner, so as to ensure ‘buy in’ both to the method of measuring and the target being set.  These targets need to be stretching of the owner’s ability but yet achievable and fair.

It is also important to include some form of benchmarking, comparing performance with both internal peers and external competitors.  The external benchmarking will ensure that the company keeps a focus on the market environment outside the company.

Finally ensure the measurement system is linked to the reward system as the reward system is used to guide individuals to deliver the standards/objectives previously set out. This reward system should be clear, motivating and the outcome needs to be in the control of the person being held responsible.

Contact: fcoombes@coombesfinance.com