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Getting Your Business "Transaction Ready"

Many business owners and managers we encounter expect that at some stage in the future they will undertake a strategic transaction; perhaps an acquisition or a capital raising and eventually a sale of the business. But it’s often a fairly vague expectation or intention with no specific timeframe or plan and in the meantime they manage the business as they always have, sometimes very successfully.

However now is always the best time to make sure you’re getting the business ready for a transaction, whatever it may turn out to be and whenever it might happen.  It may even be that a potential buyer makes an approach and you’d want to be ready for that.  In any case many of these things are ones you should be doing regardless and will serve to improve your business in the meantime often at little cost.

Your business must be transaction ready when the time comes (and that can’t be achieved overnight).  If it’s not ready, the outcome you’ll get will most likely not be as good as it could have been and you may not even get the transaction done at all. That risk can be largely avoided with some fairly simple and inexpensive steps; a few examples include:  

Regular and timely management reporting – the business should have monthly management accounts which are finalised shortly after each month end and which management actually uses to manage the business;

Budgeting – there should be an established process of preparing a detailed budget each year and managing the business to that budget. Comparison to the budget (variance analysis) and resultant changes to the budget should be an ongoing process. This is what buyers and investors expect (or at least hope for). So often we see the book-keeper prepare a very basic budget which management doesn’t use to manage the business and sometimes doesn’t even review; and

Annual accounts – the annual accounts should be completed within a few months of the year end so they’re available to buyers or investors. You might also want to consider having them audited. Also, make sure the significant assets of the business are properly recorded in the accounts.

If you have a time frame in mind for a strategic transaction, within say a year or two, you should be factoring this intention into your business decisions. For example, there might be some costs that can be cut from the business, or an investment that won’t deliver returns for several years may not be such a good idea if you’re expecting to sell well before then.

Whatever you do, think about and act on getting transaction ready well before (ideally years!) you decide to transact; it will potentially make a huge difference to the outcome of your deal, not to mention an improved performance of your business in the interim. Maybe get some advice from someone who understands what buyers and investors will expect and can help you work out what you might change.

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