Industry: Professional Services
Issue/Objectives: Company exit with early due diligence preparation
Our CMC partner was intrigued in late 2010 to be introduced via a network contact to a company whose owners had heard of CMC’s bespoke approach to providing tailored exit plans.
After a relatively short meeting it was clear that the owners wished to sell and retire, but were not impressed by the “sausage machine” approach of some of the SME sectors big names. They wanted a more hands on approach from an experienced business professional backed up with superb support team. Needless to say CMC was retained.
Quite often business brokers prepare an Information Memorandum, market the company and then re-engage at a deeper level for the final transaction. This is all well and good but it can easily produce discounts to the company value when it is too late to remedy them; after due diligence. This is where the CMC approach pioneered by our CMC Partner has served to differentiate the practice and add exit value to new clients.
This approach is based on CMC’s skill at project managing an exit and all the key professionals (lawyers, tax advisors, IFA’s etc.) involved in the process. At the same time CMC prides itself on working directly with clients to improve the business before any final price is agreed. If the owners do just two things the CMC process more than pays for itself.
The first thing is to work the business as hard as possible and leave the exit project to the retained and trusted CMC partner. Nobody, no matter what their skills, can both run and sell a business at the same time. That means CMC as the experienced project manager removes this burden from owner managers and allowing the owner to work even harder within the business to maximise the exit vale.
The second and equally important thing is to minimise the discounts beloved of buyers who often agree one price at heads of terms stage and then chisel away to the final minute of the final day by citing disasters in the due diligence they have conducted with their legal team.
Proper planning and preparation with CMC avoids pitfalls
CMC has worked with the client cited above and conducted a tender for legal services across the deal, which includes a “buyer due diligence” exercise at the outset.
This gives the legal team time to understand the business, but far more importantly it allows CMC and the owners to take that early stage report and take corrective action during the marketing phase to remove or at the very least mitigate those dreadful discounts. In the current exercise CMC has been able to help the owners redraft all its employee contracts, engage a specialist Intellectual Property lawyer with a style and commitment that appealed to the owner, help with refining client terms and conditions and make certain that all the statutory records will be in pristine condition for the buyer. This well planned and executed exercise didn’t turn up any skeletons hiding in closets but proved an invaluable exercise that will ensure the client receives a fair price and a bigger retirement fund for the owners.
At CMC we encourage businesses to start their due diligence preparation as soon as possible. If the business needs points for improvement, the legal due diligence will soon discover them.
If you want to learn more about how CMC can help businesses maximise exit value through diligent planning, project management and advice during all stages please contact us on 01491 829181.