For a lot of business owners, including farmers, their business will be their major asset and the value of that business will be a major part of their retirement planning.
So when it comes time to sell this key asset it’s critical that the sale process is smooth and the maximum price for the asset can be achieved.
Over the years we’ve helped hundreds of business and property owners with the successful sale of their assets.
From that experienced we’ve distilled the 4 must do’s to help you achieve a sale that will fund the retirement you’ve been hoping for.
- Change your view point
You need to look at your business through the eyes of a prospective purchaser. Identify what will be important to them and what is important to the continued operation and profitability of the business.
Can the business operate without you or are there too many aspects of the business operation in your head and nowhere else?
Do you rely on the relaxed attitude of a regulatory body or provider of a key input into your business with whom you have a good relationship? Will an incoming purchaser who does not have that relationship be as relaxed?
Make a list of these key requirements and make sure you can demonstrate to a purchaser that you can hand these on to a purchaser.
- Rules, regulations and licences
Most businesses are affected by some regulatory framework and require licences, approvals and the like.
Make sure you know and understand what authorisations you are required to hold and whether those authorisations are in place and fully complied with. Check that none of your authorisations have lapsed.
Have you carried out any development that required approval? Do you have those approvals and does the development actually comply with those approvals?
Purchasers, and their advisors, will conduct due diligence and will identify these issues.
You may have been able to operate the business without those authorisations, but the purchaser will be advised that there is no guarantee they will be able to continue the business unless those authorisations are in place.
You should conduct your own due diligence to ensure all required authorisations are in place and complied with before you start to market the business for sale.
While the increased interest from corporate investors in agribusiness provides great opportunities for those seeking to sell their business, these purchasers require a much higher level of corporate governance and regulatory compliance.
- Contracts, customers and suppliers
Does your business rely on key suppliers, customers or employees? Have those arrangements been documented or have you just been able to rely on the good relationship you have with those key contacts?
These types of arrangements can range from a lease of premises, water supply agreements, access agreements, the arrangement you have with some of your main customers or suppliers and the terms of employment of a critical employee.
A purchaser will be advised that those key contracts should be documented so they can be sure what the terms of those arrangements are and they can be satisfied that those arrangements will continue once you are no longer involved in the business.
You should be able to provide copies of written agreements in relation to all of these key contracts to prospective purchasers.
- Minimise your liability
If you can provide certainty and security to the purchaser by demonstrating that the purchaser will have access to, and control of, everything they will need to continue to operate the business, you will be in a better position to negotiate a good price and limit any liability you may be exposed to in relation to either the business or the sale contract after completion of your sale.
For example, if all licences and approvals are in place on completion, neither the purchaser nor the relevant regulatory authority, will have cause to seek redress from you if the purchaser conducts the business without the necessary approvals.
If you can provide the purchaser with that certainty before contract, they will likely accept fewer warranties from you in the sale contract, reducing your exposure to liability after completion.
A purchaser may also use incomplete licencing or failure to document key contracts to negotiate a reduction in the price or some other more favourable term for themselves
We have had sales become extremely difficult, and even falling over, because the seller had not properly prepared the business. You will be in a much stronger negotiating position if you are not constantly trying to satisfy the concerns of a worried or frustrated purchaser.
We can assist in the due diligence required to prepare a business or property for sale, as this is part of our process when preparing contracts for the sales of complex agribusinesses and when acting for purchasers of these businesses.
As always, plan early, plan often and plan with your advisers.