How to Value & Sell your Business doc

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Business and management
ISBN: 978-0-7494-5117-2
Kogan Page
120 Pentonville Road
London N1 9JN
United Kingdom
www.kogan-page.co.uk
Kogan Page US
525 South 4th Street, #241
Philadelphia PA 19147
USA
The value of your business is closely linked
to your ability to sell it. How to Value and Sell
Your Business will demystify all the ways of
valuing and selling your business, taking
you step-by-step through assessing its
present and future worth, identifying
potential buyers, maximizing the selling
price and managing the sale process.
You cannot begin to plan an exit from your
business too soon. Having a sound strategy
in place will make all the difference when
you do come to sell up, and will ensure you
make maximum profit from the sale.
Explaining technicalities in straightforward
language, How to Value and Sell Your
Business takes you through all the options
and highlights the various paths you can
take to ensure the best deal possible.

Andrew Heslop has bought, developed
and sold businesses for profit. Prior to
setting up and running his own businesses,
he worked for several years as a business
consultant with PricewaterhouseCoopers.
He now runs workshops on negotiation
skills, winning business in competitive
pitch situations and selling to large
organizations.
Achieving an accurate assessment of a business’s value and having a clear exit strategy
are an essential part of effective business planning, even if the sale may be well in the
future. How to Value and Sell Your Business aims to inform and support business owners
and senior managers of private firms who are seeking to value their companies and to
release equity through a sale or share offer. The book includes chapters on:
• identifying potential buyers;
• maximizing the company’s value;
• developing an exit strategy;
• handling legal issues;
• managing professional advisers;
• surviving a lock-in period.
W
ritten by an experienced business owner in a practical “how to” style, this book considers
the strategic issues surrounding a company sale, and provides an accessible explanation of
the whole valuation process and the options for sellers. It gives particular emphasis to the
legal and financial issues, and provides readers with a level of knowledge that will enable
them to talk to business advisers with confidence and make the very best use of the
resulting professional advice.
The essential
guide to
preparing,

valuing and
selling a
company for
maximum
profit
Andrew Heslop
How to
Value & Sell
your Business
RECOMMENDED BY
INSTITUTE OF DI RECTORS
Heslop
HOW TO VALUE & SELL YOUR BUSINESS
HTValueSellYrBiz_aw:Layout 1 28/11/07 11:17 Page 1
How to
Value & Sell
your Business
HTVyourBiz_HP:Layout 1 27/11/07 14:48 Page 1
For my three girls: Tracey, Holly and Lucy.
With love.
London and Philadelphia
The essential guide to preparing,
valuing and selling a
company for maximum profit
Andrew Heslop
How to
Value & Sell
your Business
HTVyourBiz_TP:Layout 1 27/11/07 14:46 Page 1
This book has been endorsed by the Institute of Directors.

The endorsement is given to selected Kogan Page books which the IoD recognizes as being
of specific interest to its members and providing them with up-to-date, informative and
practical resources for creating business success. Kogan Page books endorsed by the IoD
represent the most authoritative guidance available on a wide range of subjects including
management, finance, marketing, training and HR.
The views expressed in this book are those of the author and are not necessarily the same as
those of the Institute of Directors.
Publisher’s note
Every possible effort has been made to ensure that the information contained in this book is accurate
at the time of going to press, and the publishers and author cannot accept responsibility for any errors
or omissions, however caused. No responsibility for loss or damage occasioned to any person acting,
or refraining from action, as a result of the material in this publication can be accepted by the editor,
the publisher or any of the authors.
First published in Great Britain and the United States in 2008 by Kogan Page Limited
Apart from any fair dealing for the purposes of research or private study, or criticism or review,
as permitted under the Copyright, Designs and Patents Act 1988, this publication may only be
reproduced, stored or transmitted, in any form or by any means, with the prior permission in writing
of the publishers, or in the case of reprographic reproduction in accordance with the terms and
licences issued by the CLA. Enquiries concerning reproduction outside these terms should be sent to
the publishers at the undermentioned addresses:

120 Pentonville Road 525 South 4th Street, #241
London N1 9JN Philadelphia PA 19147
United Kingdom USA
www.kogan-page.co.uk
© Andrew Heslop, 2008
The right of Andrew Heslop to be identified as the author of this work has been asserted by him in
accordance with the Copyright, Designs and Patents Act 1988.
ISBN 978 0 7494 5117 2
British Library Cataloguing-in-Publication Data

A CIP record for this book is available from the British Library.
Library of Congress Cataloging-in-Publication Data
Heslop, Andrew.
How to value and sell your business : the essential guide to preparing, valuing and selling a
company for maximum profit / Andrew Heslop.
p. cm.
Includes index.
ISBN 978-0-7494-5117-2
1. Sale of business enterprises. 2. Business enterprises– –Valuation. I. Title.
HD1393.25.H45 2007
658.1'64– –dc22
2007041519
Typeset by JS Typesetting Ltd, Porthcawl, Mid Glamorgan
Printed and bound in Great Britain by Bell & Bain Ltd, Glasgow
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Contents
Acknowledgements xxvii
Foreword xxxiii
Introduction 1

1. Who Will Buy Your Business? 10
Competitors 1
1
Suppliers 14
Customers 15
Employees 17
Franchise businesses 18
Private equity firms 19
Business angels 19
2. Valuing Your Business 21
Sell more, charge more, spend less 21
A little economic philosophy 22
Customer base 26
Predictability of workload 27
Costs under control 27
Management 29
Sustainable profits 29
Assets 29
Strategic fit 30
Externals 31
Barriers to entry 31
Valuation methods 32
Sector rules of thumb 39
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How the big boys do it 40
Creating your own investment story 43
3. Developing an Exit Strategy 47
Set the parameters of success 48
The time to make a profit is. . . 49
Targeting potential buyers 50
Planning ahead to maximize value 53
Managing your exit process 54
Different types of money 56
Tax planning 60
4. Professional Advisers 66
Accountants 67
Lawyers 71
Business brokers 76
5. Marketing Your Business 81
Public relations 83

Finding the buyer 95
The sale memorandum 97
6. Managing the Sale Process 102
Heads of terms 104
Preferred bidder 105
Be organized 105
The lawyer as project manager 106
Tax clearance 107
Other parties 107
Negotiation skills 107
Managing timescales 1
13
Communication 1
14
Keeping on track 120
7. Legal Documentation 123
Confidentiality agreement 124
Heads of terms 125
Due diligence 126
Share sale agreement 128
Other important documents 132
Document preparation 136
Contents xvii
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8. Advice for Specific Sectors 138
Factors that might affect the sale 138
Consultancy 140
Service businesses 144
Retail 145
Manufacturing 146
9. Golden Handcuffs: Surviving a ‘Lock-In’ Period 149
Big decisions are now shared decisions 150
Never explain or justify 150
Small factors become annoying 150
The Human Rights Act 151
Ideas for a successful lock-in 152
Conclusion 157
10. What Next? 159
11. A Call to Action 167
Who will buy your business? 168
Valuing your business 168
Develop an exit strategy 169
Professional advisers 169
Marketing your business 170
Managing the sale process 170
Legal documentation 170

Surviving a lock-in period 170

Appendix A. Sample Documents 172
Appendix B. Sources of Help and Information 175
Index 176
Contents xxiii
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