Newsflash: Selling your business in the UAE? How to successfully navigate the process
When the owner of a small or medium-sized enterprise (SME), whether it be an individual or a corporation, decides to sell that business it is of paramount importance that there is a smooth, professional navigation of the complex and often lengthy sale process to ensure that the business is sold to an acceptable purchaser at the highest possible price.
Yet many UAE SMEs do not have the in-house financial expertise to make sure the seller maintains control over this process – a process which can last between six months and two years. SMEs need to have the capability within their management team to get the business in the best possible condition for sale, to prepare the business case, financial projections, seller valuation and other sale documentation, to convincingly present the business potential to interested parties and to conclude the sale, whilst at all times liaising with and managing the various professional advisors involved in the process. For this reason, many UAE companies hire a vCFO – an interim or part-time Chief Financial Officer – for the duration of all or part of the sale process.
Preparation for the sale is key and should start several months (and often a couple of years) before soliciting potential buyers so that management can ensure the business is in the best possible shape for the sale. A vital element of this process is ensuring the business has a capable finance function so that robust financial controls, systems and procedures can be implemented. Potential purchasers need to have confidence that the financial records and statements, which they will crucially rely on in valuing the business, are accurate and reliable.
Also important in the preparation for the sale is advanced planning to maximise profit at the time of sale, for example, through cost savings and refraining from initiatives with up-front fixed costs where the benefit to the business comes in future years.
Selling a business is, above all else, about telling a compelling and convincing story about the future prospects of the business, typically, in an information memorandum, business plan and management presentations intended to attract and inform potential buyers. That narrative should be supported by a financial model and detailed financial projections prepared on the basis of transparent, realistic and defendable assumptions. A comprehensive data room should be set up to adequately present all pertinent supporting documents to facilitate the buyer’s due diligence.
To ensure a smooth, comprehensive and successful sales process, sellers will generally enlist the services of professional advisors for such aspects as drafting of legal documents including the sales and purchase agreement, the structuring of the deal, advice on due diligence documentation, marketing the sale, preparation of valuations and the identification and approaching of potential purchasers.
Notwithstanding the outsourcing of elements of the process to advisors, the seller should ensure that there is the requisite in-house expertise to fully comprehend the acceptability and veracity of the advice given. This should include having their own view as to the value of the business, based on an internal evaluation of, for example, an appropriate earnings multiplier to apply, discounted cash flows, valuing intangible assets and synergies potentially available to each interested party.
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