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1. Strategic Assessment

Critically evaluate each of the alternative exit strategies: Public Listing, Merger, Management Buy Out, Trade Sale, Family Transfer, or Liquidation of Assets. Understand the current business value and the unique drivers of your business' value. Understand the roadblocks to your proposed exit strategy. Map the chosen path to your exit.

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2. Create Value

Planning is critical to value maximisation. Implement value improvement strategy well in advance of the planned exit. Mitigate all identifiable risks and enhance key value drivers. Assemble a team of advisors. Prepare the business for commencement of the campaign. Finalise all preparations before going to market.

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3. Value Extraction

The result of years of your hard work. The outcome and timing of the exit transaction will depend on your chosen exit strategy. The outcome may be a listing on the ASX, a merger with partial sell down of equity, the gradual transition of ownership to an employee or family member, or 100% cash settlement to a third party.

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Are you running a valuable business?

The ultimate test of value for your business can be found in a simple question: Would someone want to buy your company?

Whether you want to sell next year, a decade from now, or pass on the business to family, you need to build a valuable asset for the future. The Sellability Score is an interactive tool offering a comprehensive assessment of the “sellability” of your business.

When you complete the Sellability questionnaire, you'll get an overall Sellability Score out of 100 plus your score on the eight key drivers of Sellability, which are statistically proven to increase the value of your company. Based on the outcomes of your Sellability Score, we will help you build a strategic plan of action.

Your free report starts here...

Your business sale or transition project managers

Business Sale Planning provides specialised consulting services to a diverse mix of clientele. Our services are varied however all have one centric goal. The maximisation of business value on exit.

We provide expert advice to accountants, mergers & acquisitions advisors, business brokers and solicitors as well as working directly with business owners.

We primarily focus on small to medium business between $1m to $20m in value however we regularly assist clients that fall either side of this bracket.

Think of Business Sale Planning as your sale or transition project manager. Our role is to provide you with specialised consulting advice and to facilitate the smooth flow of information between your chosen advisory panel, leaving you with the time to focus on running your business rather than trying to sell your business.

Our small team of advisors specialise in all facets of the business sale transaction, including everything from comprehensive valuation assessments and value maximisation strategies, to vendor due diligence, preparation of corporate documentation such as information memorandums, prospectus or small scale offer documents, right through to the finalisation and settlement of your business sale contract.

Industry Affiliations

Testimonial OneInstitute of Chartered Accountants
Our firm is a proud member of the Institute of Chartered Accountants Australia & New Zealand.

Testimonial TwoBstar - Growing of Going
We are members of the Bstar partner program providing specialised succession planning advice.

Testimonial ThreeBusiness Valuation Specialisation
Haydn Erbs (C.A.), BV (B.Acc), (B.Mar.) - The highest designation for Australian Business Valuers.

Testimonial FourSellability Score
Sellability Score value builder system

News

August

7

Does your business have X-Factor?

Levels of value

Recently I came across a micro sized business that sold for nearly $3m. Whilst the price on its own was not extraordinary, what was impressive was the fact that it sold for a 16x multiple of earnings!

 

I was somewhat astonished given that most small businesses (i.e. under $5m turnover) sell for multiples in the range of 2x to 3x and some outstanding businesses as high as 5x their adjusted annual profits.

 

Naturally I asked the question, why would another business acquire a small business generating under $200K profits for around $3m? What was the special sauce, the secret ingredients, “the X Factor” that motivated this buyer to pay substantially more than the Fair Value for this business? Read more

May

13

Budget Vs Business Value

Joe HockeyThank you Mr Hockey!

Australian small businesses received a reprieve overnight following the Federal Treasurer’s 2015 Budget speech in the form of lower corporate taxes and accelerated depreciation rates.

 

Sure the changes look favorable and no doubt they will result in more cash in the pockets of many struggling small business owners, but how do the overnight changes impact on your business value?

Read More…

May

5

5 Ways to maximise your business sale

Like most business owners you have probably invested large sums of money and many years of hard work into growing your business. For many business owners its comes as a surprise to learn that business value does not directly correlate to how much money you’ve invested in the business or how much hard work has been done in the past.

 

In reality, the main drivers of business value are earnings, growth and risk. Logically, it goes without saying that a business which has greater growth potential and less risk to a buyer is going to make a more attractive investment or acquisition target than a business which has flat lining vital signs or is exposed to a number of threats to current income streams or assets.

 

So how do you MAXIMISE the sale price of your business?

Read more…

 

 

April

27

2015 M&A Activity Up 50% on 2014

According to a recent survey of 600 Australian Mergers & Acquisitions (M&A) specialists by Intralinks, the value of announced deals in the March quarter was up more than 50 per cent year-on-year. This figure encapsulates the Asia-Pacific region, excluding Japan but including Australia and New Zealand.

Whilst this is just the first quarter of the year, based on the flying start and other encouraging pipeline forward indicators, it is expected that 2015 calendar year will be a substantial increase over 2014 (which was the strongest year since the GFC).

The strongest performers year to date in our region have been in the infrastructure, real estate and technology sectors, a sentiment which echoes global M&A activity which has seen telecommunications, media, entertainment, consumer goods and technology at the forefront of early stage (“pre-due diligence”) activity.

According to Intralinks March Qtr report, early M&A activity for the technology sector alone is up 286% on the prior year. Intralinks also reports a 400% increase in the level of due diligence relating to outbound due diligence in the first quarter of 2015 versus 2014.  

A significant driver of the substantial increase in activity is related to the devaluing of the Australian dollar (causing an increase in the affordability of Australian businesses for international acquirers) as well as the geographic expansion and diversification of Australian based businesses.

For more information on this topic check out the Intralinks Deal Flow Predictor…

April

24

Business Sale Market Continues To Rise

BuyBizSell Insight report graphic

 

The BizBuySell Insight Report is a nationally-recognized economic indicator that tracks the health of the U.S. small business economy. Whilst the report is not directly transferable or representative of completed market transactions in respect of the Australian business sales market, it does offer some insight and recent trends which may be inferred to our local market.

The full report indicates the number of of completed business sale transactions (for privately owned businesses) is up 6% on the prior year, with the price achieved on sale also continuing to rise significantly in line with increased business earnings. The BuyBizSell Insight report provides considerable detail as to which industries and small business segments are selling for higher multiples and the relationship between asking price and sale price.

This type of data is invaluable for those who are considering the sale future sale of their business.

 

To download a copy of the full report please click on the following link

BuyBizSell Q1 Insight Report

 

 

 

February

10

Valuation of Rapid Growth Businesses

As business valuer, i am often asked how do you accurately determine the value of a business which has incredible growth potential but a less than impressive trading history?

 

When you have a business that is a start up or in early stage growth there is inherently a limited trading history. Because of this most traditional valuation methods (such as”capitalisation of earnings”, “notional realisation of assets” or “dividend valuation methods”) are inappropriate as the business either has no profits, no significant assets or has paid no dividends.

(more…)

August

28

Vendor Due Diligence

If an accounting professional were to audit your financial statements what would they find?

When selling a business almost 100% of contracts to purchase will be subject to a due diligence period. During this period the acquirer and their financial advisors will scrutinise the Financial Statements of the business looking to identify areas of risk.

Overstated revenues, understated expenses, over-inflated assets are the most commonly reviewed key risk areas. In the event that the buyer determines the use of incorrect accounting policy or more serious misrepresentations, it is likely that their initial offer price will be reduced accordingly.To substantially reduce the risk of this happening, vendors should undertake “Vendor Due Diligence” prior to commencement of the marketing campaign. Vendor due diligence aims to identify potential areas of risk and determine the most appropriate path to mitigating the risks so as that there are no surprises during the contractual due diligence period.

For example take a business with reported $3.1m EBITDA in the current period. The vendor receives a cash offer of $20m based on a 6.5x multiple. The vendor accepts and goes to contract subject to Due Diligence. A big four accounting firm undertakes an audit of the Financial Statements and discovers that earnings have been over-inflated due to the use of aggressive accounting policies relating to the recognition of income which are arguably inconsistent with the International Financial Reporting Standards (“IFRS”).

The buyers advisors conservatively apply the revenue recognition principles in strict accordance with IFRS principles and calculate revised earnings of $2.2m in the current period. As a result the vendor receives a revised offer to purchase of $11m plus a 3 year earnout agreement based on 30% of earnings over $2.2m. Effectively the earnout could equate to around $2m based on current forecasts resulting in a total offer of $13m (versus the original $20m that was received prior to commencement of due diligence). The revised cash offer has now been based on a multiple of 5x EBITDA as a result of the increased perceived level of risk and substantially reduced earnings, with the buyer seeking to mitigate some of this risk through the provision of an earn out agreement.

Undertaking vendor due diligence prior to marketing the business would have highlighted this issue (along with various other adjustments) prior to being discovered by the buyers financial advisors. Vendor due diligence would have enabled the vendor the opportunity to bolster their argument and documentation in support of their current adoption of accounting policy in order to successfully defend their position and justify their reported earnings. Arguably this could have resulted in a substantially higher negotiated offer price.

Vendor due diligence effectively highlights areas of risk both in the Financial Statements and from an strategic sale planning perspective. Vendor due diligence provides business owners with the opportunity to mitigate the identified risks before they are exposed during the negotiating period. In our experience the cleaner the Financial Statements and less risky the business appears to have, the more likely it is that the business sale contract will be completed.

Vendors should take advantage of the opportunity to mitigate all potential risks prior to going to market in order to streamline the business sale and minimise final offer adjustments. This approach regularly saves our vendors substantial sums of money and provides an exceptional return on investment given that each dollar of earnings is effectively multiplied by the capitalisation rate (6.5x in the above example).

June

29

Strategy 10 – Prepare For Due Diligence

Part 10If you plan to sell your business or are currently marketing your business for sale then you need to start preparing your due diligence folder now.

The rigours of due diligence are intense. At a time when you need your business to be humming along at its maximum your focus needs to be on running the business and continuing to grow sales. At this critical time you can’t afford to drop the ball and spend days putting together all of the information that a buyers accountant will request.

The best strategy is to pre-empt the information needed during the due diligence process and pre-prepare it in readiness for the request. Whilst not all of information requested during the due diligence can be pre-prepared, the vast majority can be.

In our experience the quicker and better presented the requested information is provided to the buyers accountant the greater the likelihood of a successful due diligence.

Read more…

 

June

17

Strategy 9 – Capitalise Your Assets

 

Part 9If you plan on selling your business in the new financial year it is crucial that you make every effort prior to the finalisation of 30 June 2014 Financial Statements to maximise your current year earnings. One way to do this is to capitalise your assets by moving relevant expenses from your profit & loss statement to the balance sheet where they are recognised as assets.

 

Australian Accounting Standards stipulate that assets are defined as having some form of future economic benefit which is controlled by the business as a result of past events. Therefore consider your current period expenses and ask the question, is it logical to recognise any of these expenses as assets, do they hold future potential value to my business? If the answer is yes, ask your accountant or bookkeeper to capitalise them.

 

Most businesses are run to minimise the amount of tax they pay each year and so it is common to write of significant amounts of “assets” as the owner has a greater preference for claiming a tax deduction than growing the assets on the balance sheet. However in the lead up to the planned sale of your business, the accounting focus must change from tax minimisation, to earnings (profits) maximisation. Remember that every dollar of earnings is multiplied by a factor of usually between 1 & 6 when determining the business value, so whilst you may be saving $0.30 in the dollar of tax, you are effectively foregoing between $1.00 and $6.00 of business value!

Read More…

 

June

10

Strategy 8 – Terms of Trade

Part 8If you plan to sell your business sometime in the new financial year, you would be wise to consider your present terms of trade. By terms of trade I mean the how much time you give your customers to pay your sales invoices and how long you take to pay for your purchases.

Your terms of trade are a major contributor to your working capital requirements and your overall cash flow position.

Imagine if you were evaluating the purchase of two comparable businesses, both with the same level of sales and purchases and the same level of profitability. One however had far less working capital requirements due to strict terms of trade and the other with loose terms of trade and regular cash flow deficiencies which needed to be covered by an overdraft facility. Naturally, you would select the first business with strict trading terms and less working capital requirements is this business is more likely to be able to repay your initial investment in the business from having more “Free Cash Flow”

Read More…

June

3

Strategy 7 – Accounting Systems

Part 7Your Bookkeeping and Financial Reporting systems provide the evidence to potential buyers of your business which detail the financial performance, position and to an extent the value of your business. If your reporting system is not adequate or producing poor quality records your chances of convincing a buyer to purchase your business will be substantially diminished.

 

If you plan to sell your business in the new financial year or the even the next, you need to consider whether or not your reporting system adequately provides, accurate and timely reports which are capable of meeting the needs of not only management and the board but also the financial investigations and due diligence of a potential buyer and their advisors.

 

Since the advent of cloud based accounting packages an explosion of new high tech but simplistic accounting platforms and financial reporting packages have come to market.  If you are not satisfied with the flexibility of your accounting system or the quality of information it is currently producing you should consider the reviewing your options and making a change a change from the start of the new financial year.

Read more…

May

27

Strategy 6 – Report more sales

Part 6

Maximising your current year sales as reported on your Financial Statements is critical to increasing the attractiveness of your business to a potential buyer.

 

Australian Accounting Standards and International Financial Reporting Standards govern how sales or revenue should be recorded in the Financial Statements and provide guidance as to how and when revenue should be recognised in the current period.

Read more…

May

21

AIBB Small Business Sales Index Insights

Cover pageThe Australian Institute of Business Brokers (AIBB) has released its March 2014 Qtr Small Business Sales Index which reports on the state of the Australian marketplace for SME business sales.

The Report features Commentary & Data on topics such as, changes in sales prices, the time taken to sell businesses, the number of qualified buyers, factors restricting the ability to sell businesses, access to finance, buyer demand, the major reasons for selling a business and which industries are currently getting the most attention from buyers.

 

We have broken the release into two downloadable sections.  PART-1.pdf

 

To download PART TWO “The AIBB Small Business Sales Index March 2014″ free PDF , please fill out your details in the below form – and the link to download the file will be made visible.


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May

20

Strategy 5 – Minimise Discounting

Part 5Many businesses make the critical mistake of discounting the sales prices in the lead up to 30 June in order to sell their stock. Every dollar of discount directly impacts your gross profit margin and your overall net profits. Whilst preparing your business for sale increasing your sales is critical, however it should not be at the expense of your gross profit or net profit margins.

Read more…

May

13

Strategy 4 – Minimise Purchases

Part 4In the lead up to 30 June 2014 business owners who want to sell a business should consider the appropriateness of reducing their regular purchasing activities where the business already has sufficient or excess stock on hand.

The strategy of reducing stock related purchases in the lead up to the financial year end will assist in the maximisation of your gross profits which will be of significant interest to any prospective purchaser during their preliminary evaluation of business performance.

Read more…

 

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