How to offload your business (in case Corbyn gets elected)
The Times, looking somewhat far ahead to the next election, suggests it’s time to start planning to offload your business if Jeremy Corbyn becomes the next UK Prime Minister.
It’s a gated article, but access is free if you register. However, if you’re expecting a political analysis explaining the logic to start planning now, or a case for why Jeremy has a chance of becoming the next PM, you’ll be sadly disappointed.
Luke Johnson, author of the piece, is chairman of Risk Capital Partners and the Institute of Cancer Research.
In this article he goes into great detail explaining how businesses are sold, how companies find intermediaries to take them to market, the kind of fees and fee structures they face and assorted other information on the process of finding buyers and closing deals.
But precious little on why you should expect Jeremy Corbyn to become the next PM, why you should start planning for that contingency now or how best to go about preparing for that sale.
Perhaps he takes it as read that Corbyn will be bad for business, will increase Corporation Tax, take infrastructure and other businesses into state ownership, impose extra costs on business, make it more difficult to replace staff etc etc. If that’s your expectation of a Labour government, and if you think Labour has any chance of winning the next election when it’s called, it may be wise of course to think about selling your business.
For now, we recommend sitting tight and keeping an eye on the bigger uncertainty that is Brexit.
Often vendors choose the adviser who suggests they can obtain the highest price for the business. But, as with estate agents, overvaluation to win an instruction is a dangerous game. Better to place your confidence in the hands of those best suited to the job. I prefer the less grand firms; they are hungrier, and my business tends to mean more to them. After all this, the seller appoints a corporate law firm.
The timetable for a sale can vary from a matter of weeks to a year, but a typical process lasts up to six months from the first adviser briefing to completion, and will depend on funding arrangements, market conditions and how competitive the auction is.
It can be very time consuming and distracting for the vendor’s management team, especially if the deal is in effect a management buyout. Moreover, there are always perils for a seller in such circumstances. The managers might feel their interests are better served by the company selling for a lower, rather than a higher, price. They may have to be financially motivated to ensure their loyalties do not shift during the bidding.
I think the coming 12 months will be a busy period for both buyers and sellers of businesses.
You can read the article here.