When should you consider an exit or the sale of your business? Perhaps it is not high on the list of priorities when you set a new business up but, maybe surprisingly, that is when you should reflect upon a future disposal because it is at this time that you can structure and implement procedures to follow to ensure that you company is in good shape to pass the detailed “due diligence” process that a prospective purchaser will instigate when considering the acquisition of your business. Too often vendors find themselves disadvantaged in the sale process by not having in place the necessary framework. Below is a general checklist of what a purchaser will expect to see in place.
1 Historic financial information – regular and meaningful monthly management accounts (with prior year and budget comparatives with variances and commentary) with a trail to the final audited numbers.
2 Projected financial information – detailed profit and loss and cash flow projections for the current and succeeding financial years.
3 Staff – detailed staff lists with up to date contracts, and employment procedures manual.
4 Supplier contracts – ensure up to date key supplier contracts. Beware clauses that may allow termination in the event of the disposal of the business.
5 Marketing and sales statistics – where and how your sales are being generated should be detailed with summaries and split of destination and class of business.
6 IT and Systems – ensure that all contracts are in writing and up to date and that all your Intellectual Property Rights (software, trademarks, logos, domain names, database, trading styles) are registered and owned by you. A large database is of little value unless it is owned by you, sorted and maintained.
7 Regulatory files – a purchaser will be extremely interested in your relationship with your regulators and trade associations and your understanding of the complex areas of travel regulation licensing and related bonding.
8 Terms and conditions – ensure these are regularly reviewed and tailored to your specific requirements and correctly reflected on documentation and websites.
9 Taxation – a purchasers’ professionals will review all aspects of tax, direct and indirect, affecting your business. Ensure compliance in all areas particularly the travel specific complex areas such as TOMS VAT, partial exemption rules etc.
10 Management succession – Is there a suitable management structure in place, with or without you, so that the business can continue to operate seamlessly and profitably after acquisition?
A word of warning. When entering into a sale process ensure that you have an appropriate Confidentiality Agreement in place from the outset and that the purchaser is genuine and ethical. Frankly a number of divisions in larger travel entities have been set up based upon information gleaned from aborted acquisitions utilising details and ideas revealed in the “due diligence” process.