The importance of taking the right advice when selling your business

While you may have bought and sold ‘family homes’, selling a business can be a first for many, and a life changing experience at that. Having the right team around you is imperative. Many owners see their childcare business as part of their ‘family’, having grown the business organically, with their own children once attending and forming very close relationships with staff, families and children over the years.
 
With so much at stake, the importance of ensuring that the sales process is successful hinges on getting the right advice and support from the right professionals from the outset.
 
Key advisors that create the foundation and cornerstones to every successful sale fall into three categories:
 

• Your commercial agent
• Your accountant
• Your solicitor

The advisors that you choose to appoint will materially impact the speed and success of the sale process and the amount of money you receive for your business.
 
Below is a guide on what to look out for and how to find the best professionals to help with your sale.
 
1). When appointing a commercial agent
 
The purpose of instructing a commercial agent is to ensure that the best possible price and deal terms are achieved. The last question you want to be asking yourself post completion is – "would somebody else have paid more?".
 
You should always be sure to choose a company that is accredited by the Royal Institution of Chartered Surveyors (RICS) and specialise in children’s day nursery sales, as they are uniquely positioned to facilitate a successful and professional sale process. Because they know their buyers well, childcare business agents are used to working confidentially and are best placed to match your business to a buyer who will not just appreciate the true value of your nursery, but also has a similar ethos to you, and will work well with your staff team.
 
Your agent should understand the current market and be equipped to discuss recent nursery sales with you in order to support their views and recommendations on pricing.
 
It’s always necessary for your agent to view your nursery in person so that they can get a true feel for your setting and have a clear understanding of your business, and therefore a concise appreciation of the business they are selling. Every nursery is unique with its own individual selling points. The agent must identify these USP’s in order to sell the opportunity and encourage interest from multiple potential buyers. In most business sales, confidentially is key, so it’s important that your agent explains how the process is approached.
 
Instructing an agent who you feel you can trust and work well with is a must. When appointing your agent, always ensure that the person who visits your nursery and provides pricing advice associated to value, is the person who will be personally handling the sales process from start to finish.
 
2). When appointing an accountant
 
In most cases, you will already have an accountant who has worked with you for years and who knows your nursery business inside and out. Usually this person will be best placed to support you, and provide the financial advice relating to tax implications, working capital calculations and so forth. Their knowledge of your accounts should offer ease and speed to the process.
 
You should however ensure that your accountant provides you with advice from the outset in relation to the best structure of the sale, and whether an asset or a share sale is the most cost effective (tax efficient) structure for you. We have seen cases where some accountants have not fully understood or have not been comfortable with a share transaction and this has led to a number of issues, causing sale processes to be aborted.
 
A couple of examples of key topics to query with your accountant before entering into a share sale process are considerations around working capital and computations of completion accounts. These are often not discussed until very late on or at the end of a deal, and can often lead to disagreements between the seller and the buyer which can be detrimental to the deal.
 
3). When appointing a solicitor
 
Having selected and agreed a deal in principle for the sale of your business to a carefully selected buyer, the next important stage is for the lawyer to be instructed.
 
Experience is invaluable. Over the years we have come across owners who say, "I have used the same family lawyer for the 25 years and he has handled every legal transaction for me".
 
While this may be the case and they have done a sterling job, selling your nursery business is a different kettle of fish!
 
The vast majority of sales that we facilitate are structured as the sale of the entire share capital of limited companies. The share purchase agreement (contract) will include extensive provisos associated to warranties, working capital, indemnities and retention amounts. There is a lot of detail about the business that needs to be addressed by a lawyer who not only has specialist legal knowledge, but also knowledge of the childcare sector in general.
 
Cloud data rooms have become incredibly popular and are frequently used to support sales processes - and they can assist lawyers by speeding up a transaction process dramatically.
 
One question we do get asked is, "Does my lawyer need to be close to where I live?". The answer is no - invariably most of the transaction is not done in person and a lot of lawyers will come to see you.
 
When choosing a solicitor, it’s important to look for someone who can both support you, and pragmatically advise you. Your agent will always be able to recommend some good lawyers who they have worked with on previous deals, and who they know are experienced in all types of nursery sales.
 
When appointing each one of your key advisors, it is crucial that you select individuals who you feel you can work with, and someone who listens to what you are saying. In many situations, you will come across individuals who are ready to spout off advice without taking the time to first understand you, your individual business, and your ambitions and objectives in the event of a sale.
 
It is vital that you focus on those people who ask thoughtful questions and then listen to your answers, as their end goal should be the same as yours – to sell your business at the best price possible, to a buyer you like, in a realistic time period.