Horwath Bastow Charleton Limerick

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The need

In the sale of a business or a shareholding, you face perhaps one of the most important decisions or business event of your career. The sale of a business is always a complex process instilled with anxieties and concerns – as well as opportunities.

This process is complex and demanding, marrying a number of different aims. The advisors need to be expert and have knowledge – especially of valuation and financial arrangements. But this is only a small part of the equation.

Your advisors must have confidence in themselves and in their client. They must also win over the confidence of the shareholders – individually and as a group.

They must understand how and why the business excels and how the target and the acquirer may come together after the deal is done. For example: How will the senior management fare out?

Advisors must be good listeners and be able to diligently factor in the different needs of shareholders and management – while never losing focus on the deal.

When the time comes to sell your business, you need an advisor that knows how to corroborate your strengths and ensure your weaknesses aren’t turned against you.

With any complex process such as this, the key is to retain a degree of control – insofar as is possible. The sale of any business or stake is very disruptive and during such a sale, it is more important than ever that the business gets the attention that it needs and that the disruption of the proposed sale is minimised. Our job is to control the process so that you are enabled to keep the business on track.

Once a deal is done, you must ensure that it is properly tax planned with regard to:

The 20% CGT rate
Any entitlement to a lump sum on termination
Any impact of the sale/exit on the pension arrangements of the owner -Withholding taxes (including dividends)
Deemed dividends on disposal
Impact of group re-organisations (for CGT, income tax/CT, stamp duty, etc).
Shares held by family members
The use of the proceeds for further investment or distribution to others

Whether you simply want advice on a particular aspect of a sale or a complete sales initiative we are the right people to advise you. We have proven ourselves with bigger transactions, but no deal is too small.

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Credentials

We are very experienced in the sale of businesses and in shareholder exit/ disposal of shares. Our team has handled and advised on sales and exits in various businesses in the past, including: multiple-site businesses, foreign currency/cross border operations, distribution and trading businesses, manufacturers, engineering companies, service companies, IT and software companies, retail outlets, hotels, hospitality, pubs and catering businesses, property portfolios, nursing homes, professional service firms.

We have overcome the multitude of obstacles that can arise in the course of a sale: uncooperative shareholders, obstructive management, HR/IR issues, multi-site operations, retirement of a principal, resolution of disputes among shareholders and many more. We are experienced in handling the often varying needs of principals in a sale – full and immediate exit, continuance in the business with partial cash encashment, equity participation, non-compete issues and negotiation of contracts for individual principals going forward with the company after a sale.

The starting point of selling your business is always a good market valuation. While the amount finally paid will depend on the identity and profile of the buyer, the vendor cannot manage the process without good advice as to value. Valuations are a critical component of the selling process and require expert practical, technical and commercial skills. Valuing the business is increasingly a complex and expert process which is explained in more detail here.

We start with a thorough financial analysis and a deep understanding of the economics of the sector, likely synergies and possible relative strengths of the two parties.

We collate up-to-date intelligence on sectoral expectations as to value, including rules-of-thumb values (with reference to Earnings, EBITDA, Free Cash Flow, and Turnover). What would the market expect to pay? We apply a deep and rigorous economic understanding of what the acquirer can pay. What is it worth to them?

It is a fundamental principle of valuation that a business or any component part is only worth the future cash flows it can generate. We at Horwath Bastow Charleton Limerick understand this important theoretical framework and how it impacts on the actual values attributed to sales and exits in practice.

We always work to a methodical programme, tailored to the specific case, but typically involving:

BRIEFING

Consulting with the owners and management in an appropriate forum to understand the issues. Report back to the client, take instructions and agree roles for negotiations. From the outset, we will establish a clear definition of roles of advisors and of individual directors in the process.

Information-gathering within the business and the stakeholders. Start the process of formulating “bottom lines”.

Desk-research into the acquirer/ possible acquirers. Gain understanding of where the acquirer is (likely to be) coming from.

Gain an understanding of the likely drivers of the transaction. Assess the realistic future growth potential of the target in the medium term, whether in terms of geography or range of products and services - both with and without the sale. What exactly will an acquirer seek? If the acquirer seeks an entrée into a new market, can it be fulfilled? How does the geography work?

VALUATION

Preliminary valuation range for the business in the context
of a likely sale.

POTENTIAL BUYERS

Identifying potential buyers:
You may already have a potential buyer lined up. Even if you do, you must consider whether there are other potential buyers out there. Typically, our clients have no particular buyer in mind when they decide to sell. Either way, we have an established methodology for seeking out buyers. This involves your knowledge of your industry and the players in it, together with our M&A experience.

Search:
Depending on your requirements and our opinion as to be best approach given the circumstances, we will typically adopt a combined approach to seeking interested parties (with a broader select audience receiving some form of teaser enquiry and some form of verifying the interest of the more identifiable potential buyers before any form of approach)

Confidentiality:
The confidential aspect of the sale is paramount.

APPROACHES

Approach:
Careful lines of enquiry are opened with agreed target potential buyers to confirm interest and the parameters of their interest.

Information exchange:
A brief but comprehensive information memorandum (IM) or similar will be circulated only to parties who have been personally contacted and who are believed to be genuinely interested. There is not always an actual IM; sometimes it is just a series of responses to questions. But an IM is a “selling document” and it is usually worthwhile to be pro-active and prepare one. It should be an effective selling document while being accurate as regards facts and realistic in tone and vision. The whole deal becomes based on the information exchanged at this point. Errors, omissions, or misrepresentations emerging at a later stage can be very unsettling to a deal and can seriously undermine already concluded negotiations.

Solicitation of offers:
In the event of clear expressions of interest, Horwath Bastow Charleton Limerick will solicit offers on your behalf. We will endeavour to represent your company in the most positive light but without jeopardising your credibility.

Competing buyers:
Ideally, you will need to have competing offers to get the best price and to ensure a fallback. Managing this aspect of the process is highly sensitive and it is a key requirement of your advisors.

ASSESSMENT OF OPTIONS

Assessment of offers:
When offers are on the table, we will decide together if it is right for you.

Preferred bidder status:
Your advisor needs to be very experienced and deft at handling this process so that delays are avoided and the deal does not change due to new information after the granting of preferred bidder status.

HEADS OF AGREEMENT

Includes the physical drafting of the heads and the fine-tuning negotiation of the heads with the target

DATA ROOM/ DUE DILIGENCE

The key is to avoid surprises or any major derailment or amendment to the deal as a result of any unexpected information.

It is important that the due diligence process is handled pro-actively by the vendor’s team – and not just in response to an agenda set by the buyer.

STRUCTURING THE DEAL

Your advisor must work quickly and pull together the various strands (ideally as in our case, from within the same firm) to ensure that the deal is optimally structured for tax, cash flow, timing, personal wealth management, risk and incentive issues. Other factors such as the impact on individual director/ principals – service agreements must be factored in too.

Sometimes the only available structure is so simple that there is little apparent need/ opportunity to tax plan (e.g. vendor will only accept sale of shares).

However, it is rare that a planning review by a tax partner will not throw up something of value to be factored into how the deal is structured or integrated post-acquisition.

CONTACT REVIEW AND DRAFTING

Review of legal documents, drafting/ negotiation of warranties and indemnities (especially regarding tax, accounting information, pensions, contingencies, etc.)Advise on requirement for retention of consideration.

PROJECT MANAGEMENT

If the client does not have the resources or experience to project manage the process, we will do so to a greater or lesser extent (e.g. set up the meetings, brief and follow up on the solicitors, co-ordinate with banks, act as conduit for exchange of information and so forth) We are quite prepared to project manage the whole process if required. But not in any way that dilutes or undermines the role of the principal in doing the deal. The aim would be to free the principal from the logistics and information exchange role.

CLOSING

Attendance at the actual closing

Available to deal with last minute queries or crises

Possibly attendance at stock take on closing

POST-CLOSING

Review and interrogate closing balance sheet.

Advise on agreement of net asset adjustments, retentions, etc.

At key points in the process there will be meetings with the client to take stock and decide on future steps.

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Features of our service

In the sale of a business, our style is to:

Facilitate the engagement between the principals on both sides:
The vendors are not buying because of the advisors. They are interested in the business and the best transactions are built upon the credibility of the vendor and his/her engagement with the buyer. We prefer to be the unseen hand in a transaction.

Protect and underpin the credibility of the vendor:
Our name and our information lend a great deal to any IM or information exchange.

Protect the confidentiality and business of the vendor:
We enforce a structure and a timetable to the process to ensure that the business of the vendor is not exposed.

Be very hands on:
A deal needs to be nurtured and controlled. And it is not over until the last piece of ink is dry. Attention to detail is essential. We are very hands-on but not intrusive. If however, action needs to be taken, we will call it quickly. The Go/No-Go decision is re-visited as often as is necessary.

We at Horwath Bastow Charleton Limerick have a culture of deal making.

Every deal is different and at Horwath Bastow Charleton Limerick you will work with people who have wide experience and a solid understanding of mergers and acquisitions.

We have a proven stamina for “difficult” deals – we embrace opportunities that may seem daunting to others. Our commitment to the client and a viable deal is second to none.

In spite of our enthusiasm for tough deals, we will only engage if we feel that a project is feasible and has the backing of credible people. We never engage a client on a “no foal, no fee basis”. However, there are other ways of mitigating your exposure to fees where a transaction does not complete while at the same time, minimising our exposure to unpaid effort.

If you retain us as advisors, you can rest assured that you will receive value for your money. Clients expect us to add sufficient value to a transaction to justify being retained; if we don’t see the prospect of doing so, we will not engage.

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Benefits to you

A sale or exit is an absorbing, expensive and time-consuming process. Unless the terms are unacceptable, it is essential that the deal is clinched as a failed sale tends to leave a lame duck. In hiring us, you know that we have the experience and motivation to make the deal happen.

We are not in the business of wasting our time or yours. Once engaged, the commitment you will receive from the Horwath Bastow Charleton Limerick team is second to none.

Very often, the involvement of advisors is essential to bridging the gap between sides while still permitting the two parties to reserve their positions.

It is critical from a credibility and a deal-making perspective that your advisors are respected by their counterparts on the other side and that you are not at a disadvantage because your advisors are less experienced than their counterparts.

With Horwath Bastow Charleton Limerick, you know that you have excellent advice and innovation in structuring your deal. In particular, we have proven ability to innovatively structure the deal for tax purposes and to maximise the net benefit to the seller.

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For further information contact:

Con Quigley

Brian McEnery

Ger Blake

E: cquigley@hbcl.ie

E:bmcenery@hbcl.ie

E: gblake@hbcl.ie