Strategies for Buying & Selling SMEs

1 Day In-House Training Course

The destruction of shareholder value through ill-thought-out acquisitions is a well known feature of the M&A market. This 1-day, in-house, training course highlights the major risks and problems likely to be encountered during the acquisition process, from a buyer’s point of view, with guidance for their avoidance or mitigation. Process and commercial failures are examined and the necessity for a sound acquisition plan is emphasised.

This course is also available on video
25 videos (8 hours 51 minutes)

The objective of a seller should be to achieve the highest price subject to the least onerous terms and to walk away from a transaction with measurable and finite liabilities. From a seller’s point of view (with particular reference to family owned companies), the course examines common errors and pitfalls in the disposal process and emphasises strategies for realising maximum value on a disposal.

Course Outline

  • Objectives of Buyers and Sellers

    • Reasons to Buy a Company – access to new markets, products or skilled staff?
    • Reasons to Sell a Company – owner ‘slowing down’ or becoming ‘risk averse’?
  • How to Make a Successful Acquisition

    • Common Errors – process and commercial failures
    • The Acquisition Plan – management, deal size, target industry & risk tolerance
    • Preparing the Management – responsibilities before and after the acquisition
    • Deciding on the Deal Size – how much is affordable?
    • Measuring Risk – the operating risk, the risk of over-paying and the risk of over-gearing
    • How to Approach the Target – directly or through an intermediary?
    • The Importance of the First Meeting – what does the vendor really want?
  • What is the Company Worth?

    • Fundamental Questions – Is the company saleable? Is it the right time to sell it?
    • Price and Value are Different – net asset value and/or discounted cash flow
    • Using Comparables – growth rate, risk profile and price-earnings multiples
    • Disagreement on Multiples – efficient market theory?
    • Negotiating Tactics – from the points of view of both buyers and sellers
  • Appointment of Advisers

    • Why Use Advisers? – how to select them and what to expect
    • Disclosure – what advisers need to know and what should they ask a client
    • Engagement Letter – scope and extent of work to be undertaken
    • Fees – time, fixed and/or a percentage on a sliding scale
  • Family Owned Companies

    • Managing Liquidity Problems – annual redemption fund, company loan programme
    • Planning for Succession – how to make it work and why it so often fails
    • Arranging a Sale – additional problems of emotion and valuation
  • Selling a Company for the Highest Price and on the Best Terms

    • Common Errors – lack of planning, separation issues overlooked
    • Sell-Side Due Diligence – keep control of the sale process, identify ‘deal breakers’
    • Management Role – prepare the directors and the marzipan layer
    • Grooming – improve the accounting systems and the budgeting procedures
    • Writing an Effective Information Memorandum – call to action

Course Notes, Slides and Exercise

Participants will receive a booklet containing copies of 13 slides and 55 pages of very comprehensive notes. Each slide will cover a number of related topics and the accompanying notes will support the content of the course to be delivered by the trainer.
During the course of the day, participants will undertake one or two exercises (problems) in groups of two or three (depending on the size of the class) which will involve considering what advice should be given to a client in particular circumstances. Participants will discuss the exercise with each other and then with the trainer and will receive a written answer to the problem.

Exercise 1

You are instructed to sell a company. Negotiations have reached an advanced stage and the principal potential buyer is now attempting to clip the price by 30% with the explanation that the target is a small private company. You are asked to argue against the logic of this proposition and commence negotiations with an alternative buyer at a higher price.

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