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KBS Corporate has extensive knowledge and experience across a wide range of sectors, enabling us to offer sound advice on achieving the maximum value for your company.
The sectors in which KBS Corporate operate include: Construction & Building Domiciliary Care & Care Related Engineering Import and Distribution IT / Technical & Web Manufacturing Specialist / Niche & Miscellaneous Waste Management & Recycling Print / Publishing, Advertising & Media Professional / Financial & Medical Property Related / Land Recruitment & Labour Supply Retail / Wholesale & Supply Services Transport / Haulage & Motor
standard we aim to ensure that our clients receive the highest standard of customer service with professional advice on hand when required
This guide explains our proven 6 step approach to the sales process, which combined with our extensive market knowledge, can help you achieve the maximum value for your company.
Our Mission
To create competitive tension throughout the sale process to ensure that we achieve and exceed our clients ultimate business sale objectives.
Welcome
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Contents
5 6 7 8 10 11 12 14 Planning Your Sale Motivations For Sale Structuring Your Sale Finding Your Buyer What Drives the Value of Your Business? How We Have Influenced Value The 6 Steps of Our Unique Approach Practical Examples Recent KBS Corporate Sales Our Business Partners The 6 Steps in Detail Regional Contacts
Contents
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Often, at a certain point in a companys lifecycle it becomes apparent that important choices need to be made.
S PL INES BUS
TH OW GR S NES BUSI
ATEAU
DECLINING BUSINESS
Without investment or fresh impetus between points A and B a business risks falling into decline. KBS Corporate has identified these parameters as the best time to consider selling your business; we can highlight the future potential of your company to a potential purchaser or investor.
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The sale of your business provides financial security for business owners who may have built their business over a number of years. The financial gain that a sale could potentially yield is a reward for many years of growing and nurturing your business.
Many business owners wish to remain actively involved in the running of their business but lack the financial muscle or skills required to fully realise the companys potential. A partial sale allows many owners to drive the business forward
with fresh ideas or investment. I wish to explore new avenues Re-setting of personal goals is normal for many business owners. Having developed a company from its roots, some business owners relish a new challenge or become burdened with extra duties involved with running a larger organisation, often this creates the desire to sell and move on to pastures new. I want to retire / spend more time with my family Business owners dedicate their lives to growing their business leaving little time to focus on personal time. Selling a business allows business owners to address their work / life balance and create an opportunity to enjoy the fruits of their success.
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Cash on Completion Cash in full on completion deals are often achieved. Buyers gain immediate ownership of the business allowing you to relinquish all ties with the business (unless a handover period or employment is agreed with the new owner). An all cash structure is ideal if you are looking at an immediate exit or retirement.
Deferred Payments This is where a percentage of the price is paid to you on a fixed basis over a period of time. The deferred part is usually a vendor loan and normally put in place to help the buyer finance the deal. It may also be paid out of future profits.
Elevator Deals These are for ambitious sellers cash-in some of your chips and keep playing. Such deals provide a mechanism to link the purchase price of a business to the potential future value of its profits. Vendors ongoing involvement is required in order to drive and elevate future profits and value. This has the potential to truly maximise value and is ideal for companies in infancy growth stage, young and ambitious sellers, entrepreneurs, de-risk, enterprise etc. The concept is exciting for those still wishing to play the game.
Performance Related Payments and Earn Outs A performance related payment structure is when an initial consideration is made on completion and then secondary performance related payments are made subject to certain performance caveats. You can maximise the deal by linking it to future growth and the buyer can hedge risks and finance the deal from future profits. An Earn Out is when the seller remains in the business in order to achieve the agreed performance criteria.
Retention Retentions are also a form of deferred payment. The idea is that the purchaser pays all the money on completion but retains a proportion, in an Escrow account held by the vendors solicitor, in lieu of certain events occurring.
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Targets are researched for RELEVANCE, APPETITE, FINANCIAL POSITION and DELIVERABILITY, and filtered down accordingly to a core of companies with a strong rationale
Step 3
We think outside the box to generate a credible list of genuinely interested parties.
Step 4
Step 5
Bidder selection
Step 6 Outcome
Sale completed
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Direct Competitor
Likely to already understand the Business Easier to identify Obvious synergies Confidentiality is key
Overseas Buyer
Less likely to have preconceptions of the Business Legal and cultural issues Potential for UK presence is a strong motivator Exchange rates
YOUR BUSINESS
Finding Your Buyer
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MBO or MBI
Maintains confidentiality May avoid marketing the Business Quality of management External funding required Cash v retention of interest Reporting and controls post deal
Financial Purchaser
Historically have paid more than trade buyers Future growth needs to be demonstrable Retain an interest Warranties External funding required
Benefit from our track record of completing sales to all these types of buyers
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1 Quality/loyalty of customer base 2 Opportunity for profitable growth 3 Sustainability of earnings/quality of profits 4 Strength of brands/Intellectual Property Rights 5 Skills of management/staff
6 Ease of integration/synergies with the purchasers business 7 Proven track record 8 Positive market demographics/opportunity 9 Defensible intellectual property 10 Capital/working capital requirement
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An average uplift of over 81% across these transactions was achieved through applying the principles of the 6 Step Sales Process
SECTOR
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x5
x6
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x10
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VALUE (m)
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Step One
Step Two
Step Three
In order to maximise your value we must first fully understand your business and objectives:
WHAT WE DO
In depth meeting and fact find Appraise and evaluate your business Understand the key value drivers Discuss deal structures and your objectives Agreement reached on confidentiality and non disclosure of information
The Information Memorandum is our key selling document and must present all relevant financial and business details, concentrating on key benefits to the buyer. Detailed financial and technical information gathering Draft Information memorandum prepared for your approval Feedback and input discussed
In order to maximise value we must present the opportunity to a diverse, extensive and qualified range of potential acquirers. Buyer list created by research team Input and authority gained to approach potential acquirers Project commenced to contact the KBS Corporate database of registered buyers Opportunity circulated amongst an extensive list of professional contacts Marketing and advertising campaign discussed, agreed and implemented
OUTPUTS
Formal instructions received and agreement reached on project brief and objectives
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Step Four
Step Five
Bidder Selection
Step Six
Having identified multiple interested parties we aim to create bidder tension and a competitive process.
With final offers in a carefully considered decision must be made based upon: Price and deal structure Ongoing involvement Likely impact upon staff Deliverability of the deal Suitable legal, accountancy and taxation expertise introduced by KBS Corporate as required
Our aim is to maintain active management of the completion timetable throughout due diligence and the legal process. Agree, monitor and project manage timetables Fully liase with all parties throughout the final stages Ensure momentum is not lost
WHAT WE DO
Advice and guidance provided prior to buyer meetings Detailed offers sought from seriously interested parties All offers and negotiations handled on your behalf by our deal executives Competitive tension maintained throughout the process
Sale Completed
OUTPUTS
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Practical Examples
Case Study 1 : Business Services Business Expectation 5m Turnover 5m, profit 1.1m 2 equal shareholder directors involved in the business wanting to get 2.5m each for a full exit c.30 buyers including trade and financial purchasers researched and contacted Our Added Value We advised that the 6 Step Sales Process would maximise shareholder value Early meetings with the shareholders helped us to identify specific gaps in the management team which we were able to help fill
Step 1
Step 2
Our Buyer Intelligence department had identified this specific sector as fragmented with opportunity for consolidation Financial institutions were targetted as the most likely buyer-type to benefit from the potential consolidation State of the art Information Memoranda identified the business as being at the forefront of its sector in terms of customer service and sales process Contracted revenue growth allowed for value enhancing run-rate profitability to be calculated Vendor financial, commercial and legal due diligence reports were delivered to selected parties in advance of outline offers Key commercial and legal points were negotiated with the preferred parties in advance of selecting winning bid Purchasers were closely vetted to assess the best cultural fit with management team
Practical Examples
Step 3
Step 4
6 Outline offers
Step 5
4 Final bids
Step 6 Outcome
1 Sale
28 days from signing of Heads of Terms to completion with no variations to the agreed deal
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Practical Examples
Case Study 2: Construction Company Expectation 4m Our Added Value
Step 1
Turnover 15m, Profit 800K 4 equal shareholder directors all involved in the business, wanting to get 1m each and a full exit. Had already received an approach
We advised that the 6 Step Sales Process would result in a better value for the shareholders rather than pursuing one interested buyer in isolation
Step 2
c.150 buyers including overseas and financial purchasers researched and contacted
Focused on targeting complementary suppliers of the companys customers and international businesses as the sector in the UK was quite niche and fragmented
Step 4
3 Outline offers
Detailed areas negotiated including the conditions surrounding, and timing of deferred consideration, future vendor roles Due to the contracting nature of the business, margin information was highly sensitive and was only divulged when absolutely necessary The offers sourced through the 6 Step Sales Process were too strong for the original interested party to match, and they fell away from the process at this stage
Step 5 Step 6
Outcome
Practical Examples
Step 3
Focused on buyer rationale: - Blue-chip clients - Market opportunity - Consolidation opportunity and cost savings - Calibre of non-vendor management
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Practical Examples
Case Study 3: Importing & Distribution Company Expectation 3m Turnover 8m, Profit 1m Key shareholders including Financial Shareholder looking to exit c.140 buyers including overseas and financial purchasers researched and contacted Our Added Value We advised that the 6 Step Sales Process would maximise shareholder value. Explored expectations of majority shareholder and the two incumbent private equity institutions
Step 1
Step 2
Search and selection rationale discussed with shareholders Use of sector and buyer intelligence with in-depth research on key targets Focus on targeting trade buyers both UK and overseas and private equity institutions with media sector Information Memoranda identified key value added features: - potential synergy benefits to trade purchasers - opportunities of rolling out company specific selling techniques into other portfolio companies - calibre of management team Coaching of management team and assistance with management presentations
Practical Examples
Step 3
Step 4
5 Outline offers
Delivered vendor due diligence reports to select parties Negotiated completion mechanism to help increase the speed of execution
Step 5
2 Final bids
Deliverability of deal structures assessed Purchasers vetted to align management styles and deliverability Vendor protection through negotiation of warranties in Sale Purchase Agreement Completion mechanism prevented value leakage post transaction
Step 6
1 Sale
Outcome
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Practical Examples
Case Study 4 : Transport Business Expectation 800k Our Added Value Our initial consultation of the business helped us to identify that our 6 step sale process could optimize buyers by looking beyond the obvious strategic and trade buyers
Step 1
Turnover 1m, profit 200k Husband and wife shareholders looking to retire
Step 2
c.86 buyers including trade and financial purchasers researched and contacted
Our buyer intelligence department carried out extensive research and approached competitors, who could take advantage of synergy benefits and complimentary businesses, who can take advantage of economies of scale
Step 4
2 Outline offers
Outline offers were collected in writing and our highly skilled negotiators helped to identify the quality of offers, advising the vendors of this Key commercial and legal points were negotiated in advance of selecting the final bids
Step 5
2 Final bids
Step 6 Outcome
1 Sale
Completion took place and the vendors were happy with a full exit and left to enjoy their retirement
Practical Examples
Step 3
Our market leading Information Memorandum helped to identify key Uniques Selling Points of the company. The IM also detailed a full financial analysis and identified areas of growth that could be explored
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Regionport
Haulage company T/O 1.01million Price: undisclosed
Clothing import and distribution company London T/O: 5.3million NP: 447,000 Price: 5million
Group Limited
Cleaning/security business South East T/O: 8.8million Asking Price: 5million
Established domestic service franchise system with 180+ franchises
CPS
Amorica
Cookware shop & internet tetailer T/O 800,000 Price: undisclosed
Recent Sales
Staniforth
40 self-contained mixed use units South Sheffield - Close to M1 Rental income: 150,000 Freehold price: 2.3million Modern methods of construction (MMC) Capacity up to: 10million Current profits c. 425,000 Price: undisclosed Corporate telecoms solutions provider T/O 955,000 Adj net 250,000 30% year on year growth Price undisclosed
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Clarks Farm
Freehold development opportunity Price: 4million Import & distribution of camping and caravan equipment Price: 4.6million
Recent Sales
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NatWest, truly appreciate the importance of being an integral part of your business, which is why every business customer has a dedicated Business Relationship Manager. As communication is paramount if business opportunities are to be maximised, our Business Relationship Managers can be contacted via direct telephone landline, mobile or email; giving you the comfort of knowing you can make contact as and when you need them.
Acorn Commercial finance are industry leaders in helping people secure the business of their dreams. The specialist team at Acorn are widely recognised as having fantastic contacts within the commercial divisions of high street banks as well as strong relationships with a number of specialist lenders. The experience within the organisation means that working with Acorn goes beyond just securing the right finance package, they can also assist you in choosing the right kind of enterprise as well as providing expert guidance on getting the best from your business. Because Acorn are independent, they only ever give you honest, impartial advice.
Cattles Invoice Finance is one of the leading providers of financial solutions for small and medium sized businesses in the UK. We work alongside you to find one-off or tailor-made solutions to suit you and your needs. Our services include, invoice Discounting both confidential and disclosed and Invoice Financing.
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Value Drivers
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Fixing the Timetable By being clear with what is expected and by when, we are able to retain control over the process and take power away from the buyer. It also means that the deal is run at the pace of the quickest and most attentive buyer not the slowest, injecting a sense of urgency and competition. Competitive Tension It is unlikely that bidders will ever know how many other bids exist or the extent of the other bids, as our 6 step Sales Process is designed to create a competitive situation. Detailed Bids Prescriptive bidding details will be requested, outlining other bid criteria as well as price. These will include: Detailed structure of the deal How the deal will be funded What approvals are required Stance on key legal issues (e.g. warranties) Intentions for the business (e.g. will it be relocated, will staff be retained?) Role for the vendors, status, remuneration, etc
This approach facilitates comparison of offers and allows each key point to be negotiated separately. Information Flow Rather than issue further information en masse, it is given out in small chunks and in return for information from the buyer. This helps us to build a better picture of the buyers real intentions, and the benefits of the deal. More knowledge means a better prepared negotiation.
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Timescales How quickly can each party complete and what level of due diligence is required? Who are their advisors and lawyers and do they need additional approvals? Intentions Do the buyers plans for the business accord with your own wishes how might this impact on the future for your staff? Empathy Could you work with the buyer post transaction, and what impact may this have on any deferred or contingent consideration? Deliverability One deal that looks better on paper may not be as deliverable as another (e.g. may need to raise external finance). This is possibly the most important factor in choosing the buyer. Legals We can help with the appointment of a corporate lawyer to draft the legal documents on your behalf, as well as assessing, explaining and helping with negotiations on any commercial points.
Bidder Selection
Ongoing Involvement Are you required to stay in the business and if so, in what capacity and for how long? Are you to be remunerated?
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Step 6 Completion
A deal is now agreed in principle and the buyer will usually be afforded a period of exclusivity to undertake the necessary validation of the business as presented to them, and to complete the legal agreements. This process is likely to take a number of weeks, but if managed effectively it can be relatively straightforward. We do this in a number of ways: Project Management There are a number of parties with differing objectives to the transaction; we set out a clear timetable and completion plan that everyone is advised of, and monitor and drive the delivery of milestones against this timetable. This fosters ownership and accountability of the delivery of the milestones. Such parties include: You The buyer Due diligence providers The buyers financial advisors At least two sets of lawyers Any of your staff who need to be brought into the loop to facilitate completion (e.g. Financial Controller)
Due Diligence We help you to produce any information requested by the buyers accountants, and ensure that it is presented in a consistent and constructive way, as we understand how the process works and the drivers behind such requests. Managing Bottlenecks In almost all deals, issues arise that are not core to the business but which need resolving (e.g. property, insurance, IT issues). Our experience enables us to resolve these as quickly as possible and maintain momentum. Act as a Buffer The process can be a stressful and emotional rollercoaster for both buyer and seller and tempers can become frayed, potentially damaging relationships. We can act as a buffer to keep things on an even keel and help raise issues in a constructive and impartial way.
Completion
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Additional Information
This guide outlines the basic process that we follow when we are instructed by a business owner to sell their business. We are certain that you will have additional questions relating specifically to your business. As we are experienced in a wide range of sectors we would be happy to discuss your circumstances in a more personal, yet confidential and obligation free manner. Please use your regional contact numbers to speak to an experienced advisor:
North West: 01204 465888 North East: 0191 230 5333 Yorkshire: 0113 250 5050 Midlands: 0121 422 0222 South West: 0117 922 0777 London/South East: 0207 584 5841 Wales: 01978 266655 Scotland: 0131 228 8777 East Anglia: 01603 424252
You can visit our website for more information on the benefits of instructing KBS Corporate to sell your business. Here you can sign up to our regular newsletter which identifies recent sales, sector news and much more.
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Regional Contacts
KNIGHTSBRIDGE HOUSE FOLDS POINT FOLDS ROAD BOLTON BL1 2RZ TEL: 01204 465 888 FAX: 01204 465 999