Contrary to what many people believe, mergers and acquisitions have continued at a pace during the Covid-19 pandemic. Advances in IT such as virtual data rooms and the use of Zoom, Microsoft Teams and DocuSign have enabled deals to progress with ease, and now, those in the happy position of being ready to sell their business will want to do so as promptly as possible. Here are our tips for a successful deal:
You never know when you may be approached by a potential acquirer. Make sure your financial and corporate information is up to date and easily accessible. If you plan to engage with corporate finance advisers and start your own sale process, this discipline will be equally valuable.
Track down copies of your key contracts
Make sure that you have complete and dated copies of your contracts, signed by both parties. If you can’t locate copies of the contracts themselves then it is worthwhile compiling a spreadsheet of the main contract terms that you believe are in force. A buyer will need all of this detail.
Dealing with your bank
We’ve found that during the Covid-19 pandemic, banks have been taking several weeks to deal with even straightforward requests to release security. Be prepared to factor some additional time into any deal to allow for delays associated with this aspect.
Review employee incentive arrangements
Many companies put EMI share option schemes in place during Covid-19. These are great incentives for key employees but if not properly documented they can be a real headache. Review your existing documentation early to make sure that it works in the way that you intend – particularly if an exit is planned.
Check your holiday pay calculations
A recent Court of Appeal decision highlighted the fact that many companies have not correctly calculated holiday pay for their employees. Depending on the circumstances the figures involved can be quite significant and most buyers will expect the sellers to bear the cost of any exposure as this is ‘on their watch’. We recommend carrying out an early review to see if this is an issue and devising the most appropriate strategy to deal with it.
Website or software development
We’ve come across a number of situations where sellers have commissioned independent developers to create works for them and their belief or understanding was that they owned all of the relevant intellectual property simply by virtue of having paid for it. This is not always the case and buyers can sometimes insist on obtaining assignments of the relevant IP from the developers – an additional cost and headache for the seller
If you’re thinking about selling your business we’re happy to chat through your plans at any time – give us a call.