Peter Carruthers wrote about it many years ago in his book Crashproof Your Business: Apart from much of the information he gave about frustrating creditors, he was particular about the wealth of experience a banker has versus that of a business owner when it comes to negotiating a loan. The banker does this every day, the business owner does it from time to time when he is under severe cash flow stress and will agree to a lot of silly things.
Similarly with selling a business. You will only do this a few times in your life.
- It is probably not wise to ignore your tax professional who knows what tax laws changed yesterday. Some probably did change because they seem to change almost every day. Tax professionals do this work every day.
- Using a lawyer is probably a good idea if there are any contracts to be signed. There are contracts. It is probably not a good idea to ask a friend who has been exposed to a few M&A deals for a listed giant to look at it for you. He would have had a team of lawyers covering his back. Lawyers deal with contracts.
- Listening to your accountant and talking to him about stuff is also probably quite high up there. Accountants work with numbers all the time.
- Using some sort of intermediary to negotiate the deal for you works well if you choose the right guy. They negotiate deals every day.
- You continuing to run your business is probably the best thing you can do. None of the professionals mentioned above would dare to tell you how to best manufacture your widget. That’s something you do every day. That’s why you have a decent business for sale.
Why do I write this?
- I am busy dealing with a divorce attorney who believes he can just as easily peruse and redraft (read: “cock up”) a commercial contract. The rules around conditions precedent are beyond him.
- I am dealing with a book keeper who believes that he knows how to value businesses. He does not have the first clue. His 30 year old text book from varsity is not a lot of help, and nor is Google. Neither of those sources know a lot about what is happening in South Africa this year as regards buying trends, prices being paid, interest rate movements, developing alternatives and much more.
- Another book keeper believes she is a tax expert. Something about a course she did five years ago. It may mean the difference between her client paying 13% tax and 34%. That difference alone, in this instance will be enough to pay all the best professionals, and still have a lot of money left over for some fun and games.
- I am dealing with a jaded senior executive who sometimes gets to have another look at an agreement for his friends, when he gets home at night, and certainly after he has had his quota of Scotch for the night. He has negotiated multi hundred million Rand deals before. This little R5M deal is a walk over. Unfortunately for his friends, it is the only R5M they have. They deserve better treatment. The erratic and conflicting changes he keeps making late at night to their agreement means someone else will buy the business before they do. At least his ego is getting a good rub down.
So I suppose that further than listening to your professionals; choose the right professionals.
I own a private engineering FET College in Durban, KZN specialising in Electrical and mechanical engineering
It will be 16 yrs “old” on 18 August 2014.
I now want to sell it
Current value R8, 7 million + 10%
Help – suggestions – what to do?
George Norval
083 450 4008
Thanks
Good professional website/service