Selling a Privately Owned Business – Briefing 9 – Sale Documentation
So, you’ve considered your objectives, carried out your planning and preparation, chosen your advisors and are now ready to commence the sale.
One of the first requirements is to put together information about the business for potential buyers. There will be a number of documents, but the key information will be set out in an “Information Memorandum”. Preparing and presenting that information is extremely important, here are ten pointers to help manage the process.
1. Confidentiality is always paramount and this should be reflected in the documentation used to sell your business.
2. For that reason you should have two separate documents, the first a brief non-confidential summary to provide to interested parties, followed by the full Prospectus or Memorandum. The latter will be provided only to serious interested parties who have been fully vetted and who have signed a formal confidentiality undertaking.
3. The Memorandum is a selling document, its prime purpose is to entice the buyer to meet and find out more about the business. An acquisition is always a strategic purchase, and the best buyers will usually have a choice of possible targets. Your Memorandum must raise the profile of your business to the top of their pile.
4. The Memorandum must be comprehensive, but must give a buyer hard facts not rhetoric. Hype, superlatives and pretentiousness must be avoided. Buyers will usually be experienced and will see through unsubstantiated rhetoric. The Memorandum must focus on the key attributes about the business and potential benefits.
5. However, the Memorandum must not be a turgid document over-stuffed with unnecessary information. Information can be easily divided into key sections, such as strategic information, operational and financial information.
6. Buyers buy solutions to their objectives. The Memorandum must fully address strategic factors and clearly demonstrate how your business differentiates from the competition, and its “unique selling points”.
7. Whilst providing the majority of the required information about the business, the Memorandum will never provide 100% of all required information. Confidentiality and commercial sensitivity will dictate that certain information will be withheld until later in the process. From a selling perspective it is also helpful to “keep some powder dry” for subsequent discussions.
8. The Memorandum should also be a flexible document, tailored to individual circumstances. It will not always be necessary to provide the same information to every buyer, and in some instances, particularly where a potential buyer is considered particularly good or attractive, specific information relevant to their individual circumstances should be added to the base document.
9. Buyers can only make their decisions based on the information you as seller provide to them. They will rely on that information, so it is important to keep full and accurate records of all information given to all interested parties.
10. Finally, an Information Memorandum is not generally a prospectus in the legal sense, and thus not normally independently verified by lawyers. It is also generally exempt from the requirements under the Financial Services and Markets Acts, but it is always advisable to seek specialist and professional advice in this respect before circulating any information.
14 July 2017