Buyouts - The Steps

Your financial backers will be looking for strong management, a stable and consistent cash flow and good potential for growth.  Therefore, the achievement of a successful buy-out entails the successful execution of key steps:

Step 1: Creating the environment in which the transaction can be conducted

This involves creating a timeframe in which the buyout can be organised and negotiated, and where possible, securing exclusivity and a contribution from the vendor towards the professional fees.

We will provide you with an initial assessment of the business and the opportunity at no charge.  This will help you make a preliminary and impartial assessment of the viability of the acquisition before incurring costs.

Step 2: Identifying and approaching potential financial backers

Every investor and lender has their own “personality”, working practices and investment or lending criteria.  It is just as important to get the chemistry right between the backers and the management team as it is to secure the most favourable terms.

Our contacts and reputation amongst financial institutions will enable you to shop for the right finance with the right chemistry and ensure that our endorsement of the business and management team will be respected.  See Finance for Business for further details.

Step 3: Formulating and presenting your plans for growth

Your funding proposal should comprise a presentation of the business, its plans and the effect and viability of the plans.

Our experience in advising management teams in proprietor run businesses and MBOs will enable you to identify the strengths, weaknesses and threats of the business to ensure these are addressed properly in preparation and presentation of the business plan.  Our familiarity with issues to be faced by the management team will facilitate in anticipating and solving problems.

Also our experience in preparing business plans will ensure the relevant strengths of the business and the benefit of investing or financing are presented in a convincing and concise manner.

Step 4: Taking steps to minimise business risk & to maximise employee motivation

The backers will wish to satisfy themselves that the management team have identified the principal risks faced by the business in achieving its goals, and that they have developed plans to mitigate the effect of those risks.  Also, that key personnel are committed to the achievement of its goals, and are suitably incentivised.

We know the critical issues perceived by backers in their appraisal of risk and will work with you to ensure they are identified and addressed in the presentation of the business to both lenders and investors.

Step 5: Determining the value of the business and agreeing acquisition terms

An investor will often consider value by reference to the ability of the business to provide a suitable return to the providers of finance.  This can differ from its value to a trade buyer.

We will conduct research that will enable you to understand the potential competitors to your bid, make judgements on market valuation criteria, and assess industry and market conditions and trends thus facilitating the business planning process.

Step 6: Agreeing terms with the financial backers

This includes the proportion of equity to be issued to the investors in return for their investment.

Our role will include helping you present to backers the strength of your proposal and by reference to the likely returns on their investment.  This will ensure the amount of their shareholding is reasonable.

Step 7: Tax Planning

This will involve appointing tax advisers with view to minimising the incidence of taxation on the business, its employees and its shareholders including giving consideration to: -

• Structuring the acquisition to reduce the impact of Corporation Tax;

• Capital Gains Tax arising from the sale of shares and business assets;

• Inheritance Taxes on the estates of the management team;

• Income Tax and National Insurance on the remuneration packages of key personnel;

• Taxation on other employee incentives e.g. share option schemes;

• Value Added Tax;

• Tax efficient financing: and

• Stamp Duty

For further information or a free consultation telephone Perry Lewis on 01476 585582 or Contact Us.