Guide to selling a business in Ireland

Every year, hundreds of businesses are bought and sold in Ireland. But if you have decided the time is right to exit your business, how do you do it while ensuring you receive the best value for it? Our guide shows you how.

For most people owning their own business is a dream come true, but there inevitably comes a time to move on. There are many reasons entrepreneurs sell their business; it could be they have taken it as far as they can and need the resources another business can provide to take it to the next level; they may want to retire, or they may want to set up another business, to name but three.

But whatever the reason for wanting to sell, it is crucial that the deal gives the exiting owner(s) the maximum value for their business. This means the business needs to be prepared for sale in the right way to achieve this, while maintaining focus on the everyday running of the business.

Achieving a successful sale can take time, but with thorough and careful planning it can achieve the value the owner seeks.

Plan an exit strategy in advance

It is advisable to have plans for how you want to exit a business in place at an early stage – even if you are not thinking about selling up in the near future. This means that when you do come to sell, you already have a good idea of what you want to do.

It is also important to speak to a business adviser, who can advise on what you need to have in place to make a successful sale – including what sort of deal would be the best for you and the business, what criteria you look for in a potential buyer, when the right time to sell is, and how to structure a deal in the most tax-efficient way.

Prepare the business for sale

If you are thinking of selling the business, then it makes sense to ensure it is in the best possible shape to attract potential buyers. This needs to be thought about well in advance of any sale – perhaps up to one or two years. It is worth trying to look objectively at the business and think about what could put off any buyer, then rectifying it. For example, it can include resolving any outstanding legal actions, or ensuring that contracts are in place that make it clear which assets the company owns – be they property, equipment, stock etc. It could be worth looking at restructuring the business to ensure there are no unnecessary costs that could affect the profitability of the business and its value.

Decide a valuation for the business

This crucial element of the sale process is often one of the most difficult. Business owners, for whom the company is their life’s work, have been known to have unrealistic expectations of what it is worth, which can derail a sale process when it is nowhere near what a buyer is prepared to pay.

Matters have been complicated by the effects of COVID in the past two years. This has affected the accounts of all businesses, meaning it can be difficult to get a true picture of the value and profitability of a business. Again, a business adviser can help, as they can provide an independent view of the business and provide analysis of where its value lies.

Find the right buyer

This is one of the most important elements. While sometimes a seller may have a buyer in mind – such as an existing management team or a complementary business – it can still be worth trying to identify other potential acquirers.

Finding the right buyer is about more than the highest bidder. You need to assess if the potential buyer’s business is a good fit with yours, or if they have similar values and philosophies that will chime with employees, customers and suppliers. Business advisers such as Malone & Co can help and screen out any bidders that lack credibility.

It is also important to keep plans for a sale confidential. If employees, suppliers or customers get wind of plans for a sale it can bring uncertainty and can even affect the value of the business.

Negotiate the deal

Once potential buyers for the business have been identified, you can invite bidders for the business. Sellers should always have a price in mind for their business – including the lowest they could accept – but this should never be revealed.

In cases where there are several bidders for the business, there may be more than one round of bids made before a preferred bidder is identified. When a preferred bidder has been found, then negotiations are exclusively with them and they can access more information about the business to evaluate their price for the business.

When negotiating it is always worth having more than one person involved – while one will lead, the other can be a sounding board and bring in a different perspective. Other advisers, such as accountants and solicitors should also be involved in the negotiation process from the beginning.

Structure the deal

Another key part of negotiations is the structure of the deal. While price is important, it is only one part. Each deal will have its own considerations and should be structured in the most advantageous way for the buyer and seller from a legal, tax and stamp duty perspective. There are also various types of tax relief that may be applicable, for example, retirement relief or transfer of business relieve.

In addition, consideration needs to be made to whether the deal is for the entire business. Some businesses have assets such as property that are not core to its operations and could be sold off separately, for instance.

Complete the legal documents

Once a deal has been agreed, then certain legal documents must be drawn up. The most important is the purchase agreement, which set out the terms of the deal. Other documents that can be required include non-competition agreements – where the seller commits to not set up a rival business within a set time – or earn-outs, where the seller stays with the business and receives a set amount if the business hits certain financial targets within an agreed period.

Close the deal

Finally, the deal must be closed – and it is important to maintain the day-to-day running of the business to ensure the buyer doesn’t have the opportunity to try to negotiate the price down.

Once the deal has been completed, then it is worth seeking advice on how to invest the profits from the business and ensure that they are placed in the most tax-efficient structures.

Get advice

Selling a business can be a complex process that needs to be carefully planned if it is to deliver the value that the business owner hopes for. At Malone & Co, our financial advisers have in-depth knowledge how to prepare a business for sale and can advise all sides on how to get through the process. Our team can help business owners to ensure their business is sold to the right buyer for the right price.

Malone & Co Accountants https://www.maloneaccountants.ie/ can assist on all the relevant aspects of raising funding, including the risks involved, as well as anything from setting up a company and ensuring it is as tax efficient as possible to providing diligence services as part of an M&A deal or funding round in the sector. We can also provide in-depth information to ensure any deal achieves the value hoped for at the outset.