Privately Owned Business newsletter - June 2022
What's next if you want to exit your business?
A trade sale is a form of business sale where a company can be sold to another business typically operating in the same industry or sector, either based in the UK or overseas. This option involves taking a number of legal, financial, and structural steps to prepare your business for sale.
Selling to a trade buyer is often the cleanest form of transaction, meaning vendors often achieve the full value of the business on day one.
Given the third-party buyer is likely to have familiarity of your sector/industry, this can make the sale process more efficient as the potential buyer understands the characteristics and demands of the industry.
A trade sale allows the owner to explore new opportunities such as fresh business ideas, diversify business assets into other investments or simply allows you to spend more time with your family. The proceeds of sale can aid your retirement or other personal, financial objectives by realising the investment of your business in full.
However, in some cases, if you wish to stay involved in the business, there is the opportunity to build a role within the group. External trade buyer negotiations can be more ruthless as personal relationships may not be as important or relevant. With less emotion attached to the negotiations over other transition options, it means that if a potential deal does not feel suitable, then it is easier to just end the process.
Structuring a competitive bidding process, with a number of potential buyers bidding on the business, the outcome sale price is often higher compared to conversations held with just a single potential buyer. They may also be able to generate synergies on the acquisition and as a result, potentially pay more for your business as a result.
While trade sales can be the quickest way to realise the full value of your business, they do come with their own set of challenges. These include:
The first stop should be a robust, independent valuation of the business and its future income. An audit of your financial systems is also important to identify any potential barriers. These can then be addressed or reflected in the sale structure or strategy. The next step is to identify resource to deliver the sale and solidify your time frames. Along with the sale negotiations, a full personal, financial and investment plan should also be drawn up for the proceeds of sale, considering tax implications and future personal objectives.
If you’d like to know more about trade sales and how our team of deal advisory, tax and financial planning advisors can assist, please use the contact form below.
Our deal advisory, tax and financial planning advisors can support you through all stages of the trade sale process. We will work with you to:
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