Case History

People often ask me what we do to earn our fee. So here is a case history based on a real sale.

A client approached me to sell their business. They had previously spoken to their accountants who advised them to try to do a management buyout.

The accountants valued the business at £2.5 million to include £300,000 of working capital so £2.2 million net. The MBO team agreed to pay this price and approached the company’s bank for funding. The bank refused to give a loan.

The MBO team then approached a commercial finance broker who found a lender for them at a huge interest rate which they agreed to pay. Unfortunately, after a thorough analysis of the accounts over many weeks, the lender reduced the amount that they were prepared to lend and the MBO team could not raise the balance of the purchase price. To save the sale the retiring shareholders were forced to agree to lend them the balance of the purchase price over 4 years without any security.

Unfortunately, when the loan papers were drawn up, they included an unlimited personal guarantee for all the members of the MBO team on a joint liability basis. The MBO team were not prepared to agree to this and the sale collapsed. The shareholders were left with a huge bill for the abortive legal and professional fees.

I was then asked to value the business. I recommended a guide price of £3 million on a nil cash balance basis. The accountants said this was ridiculous and unachievable.

We spent several weeks preparing a comprehensive marketing pack which included an adjusted and sustainable EBITDA calculation to demonstrate the true profitability of the business.

We went to market and ran a proper marketing campaign over 6 weeks with a formal closing date for offers at the end. By doing this we achieved multiple offers ranging from £3 million to £3.5 million.

We analyzed each of the offers very carefully and found that the highest offer had several trick clauses in it.  We therefore accepted an offer of £3 million i.e., £800,000 more than the offer that the accountants recommended.

Over the next 8 weeks the due diligence checks revealed some serious problems with the business. We gave advice on how best to deal with the issues raised and bought in a specialist due diligence consultant to refute as many of the alleged compliance breaches as possible.

Once the due diligence report was agreed we helped to assess the cost of correcting each of the issues and negotiated a revised price to reflect this.

Once the revised price was agreed we then liaised closely with the solicitors to agree an unusual split exchange and completion process so that the buyer could be sure that the business was fully compliant before they become legally responsible for it.

The whole process took almost a year but we achieved a much higher price than the accountants said was possible. The price difference paid for our fee nearly ten times over.

We were also able to use all the technical knowledge that we have acquired over the last 30 years to deal with the complex compliance issues that arose and come up with a rarely used legal process that allowed the sale to complete without risk to the buyer.

This is what we do and I honestly believe that noone else in the UK would have been able to get this sale through to completion in the way that we did.

Not all our sales are as complicated as this one but you can rest assured that whatever problems arise in your sale, we will have the expertise to deal with them.

To take the next step towards selling your business or for an informal chat about the process please call me on 07785 277262.

I look forward to hearing from you.