How to build and secure value in your business
by Tim Stone, 05 July 2016
Thirty leading entrepreneurs in the South have been given insights into how to build and secure value in their businesses.
The seminar was held by commercial law firm Steele Raymond and the South Coast office of Smith & Williamson, the accountancy, investment management and tax firm.
A panel of experts, with long track records in mergers, acquisitions and disposals, provided pointers for a successful sale - known as an exit in industry.
Chris Appleton, Smith & Williamson's senior partner at the South Coast office, was joined by colleague Rebecca Combes, a business tax expert, Tim Stone, a partner and chairman at Bournemouth-based Steele Raymond, and colleague Peter Rolph, a dispute resolution specialist and managing partner.
James Austin, an Investment Director with the Business Growth Fund (BGF), which provides long-term equity for a minority stake in promising UK companies, was fifth speaker.
Among the insights, Rebecca stressed the importance of legitimate tax reliefs which can be used to grow value and should be "part of annual financial planning" for any company.
They include government-supported R&D tax credits. For instance, an investment of £100,000 in new technology, for an eligible claim, would see £46,000 - 46% - given back.
Chris said anyone planning to sell their business should start early with a robust finance model and button-down value drivers for suitors so that the purchase becomes even more attractive.
Would-be sellers should also build up an arsenal of impeccable documentation so there are no questions at due diligence stage; uncertainty could drive down the acquisition price or stall a sale.
Chris added: "There should be no surprises to buyers at heads of terms and, remember, there is never a perfect time to sell."
Heads of terms are, in essence, a non-binding document outlining the main issues relevant to both parties before a deal is signed.
Tim said that to get best value and avoid price chipping the sale of your business should be treated like you were selling a house - everything should be in order otherwise the buyer will haggle the price down over cracks and, worse, subsidence.
Tips include ensuring that all documentation is correct, signed and up to date, that legal safeguards are in place to prevent all-important databases being stolen through the back door by unscrupulous employees looking to set up shop on their own, that patents and copyrights are nailed down and that great care is taken over intellectual property and associated licences.
Peter warned that employment disputes at the seller's business could also erode a sale price. He explained what to do when an employee is in dispute, saying: "If there is a problem with a member of staff, get on to it immediately and decisively."
James gave examples of BGF success stories, including Bullitt, the name behind a thermal imaging smartphone used by park rangers in the USA. Revenues soared to £50m in 2015, from £5m in 2011.
Skyscape Cloud Services, which provide highly secure, cloud-based IT services for the public sector, has seen revenues rocket from £44,000 to £30m from March 2014 to March 2016.
After the event, Chris said: "Our seminar, held jointly with Steele Raymond, provided 30 leading entrepreneurs with insights and perspectives on how to build and secure value in their businesses. We received excellent feedback and are proud to be associated with growing companies."
Held at the Hilton Bournemouth, the event was followed by a networking supper.