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Buying a Small Business in the UK - A Quick Reference Guide

A fast track to understanding the process of buying a small to medium-sized business (under £20M)

Slide Number 1		1
Slide Number 2		2
PRINT.pdf		3
A Quick Reference Guide		3
Buying A Small Business in the UK		3
Table of Contents		5
Preface		7
Chapter 1 - 10 Great Reasons to Buy a Business		10
Chapter 2 - What is The Right Business to Buy?		17
Filling the X - Factor Leadership Void		19
What Type of Business Should I Buy?		21
Chapter 3 - The Seven Deadly Sins When Buying a Business - By Jeff Lermer, Chartered Accountant		26
1. Not Defining What You Are Buying		27
2. Using The Wrong Entity For Buying A Business		27
3. Not Doing Proper Due Diligence		29
4. Not Knowing The Value / Agreeing The Price – Paying For Potential, Understanding Goodwill		30
5. Not Bothering With Looking At The Budget And Future Cash Flow, Or Understanding What You Are Buying		32
6. Not Knowing What You Do Not Know		32
7. Not Understanding Tax		33
Conclusion		34
Chapter 4 - Who is The Business Seller?		35
Why Do Business Owners Sell?		36
What Do Business Owners Really Want		37
Chapter 5 - Timescales and Statistics		40
Statistics for the Actual Business Sale Process		40
Business Sale Process Timescales		42
Chapter 4 - Finding Business Sellers		45
What Are You Looking for?		46
Chapter 5 - Connecting with Business Sellers		50
Working with Transworld M&A		50
The First Meeting		50
The ‘DO’ List:		51
The ‘DON’T’ List:		55
Chapter 6 - Valuing the Business		57
Business Valuation Methods		59
What Is Normalised EBITDA (NEBITDA)		62
What is a Multiple x		65
What About Working Capital and Debt?		66
Normalised EBITDA Calculation Example		67
Key Factors That Affect Value		69
Chapter 7 - Making Offers and Getting to Heads of Terms		77
Components of a Business Sale Transaction		77
Considerations When Constructing an Offer		80
Creating an Offer		81
Does It Cash Flow?		84
Presenting the Offer to the Seller		85
Getting to Heads of Terms		86
Chapter 8 - The Post Heads of Terms Process		88
What Happens The Day the Heads of Terms is Signed?		88
Project Initiation		89
Due Diligence Stream		90
Debt Funding Stream		92
Post-Sale Planning Stream (The Fun Part)		96
Legal/Contracts Stream		97
Acquisition Documentation		99
Completion Deliverables		100
Post Completion		101
Getting to the End		101
Chapter 9 - Determining Working Capital and Excess Cash		102
Terminology		102
Cash Free/Debt Free		102
Excess Cash		103
Excess Working Capital		103
Tax Considerations		104
Long-Term Debts		104
Director’s Loan Accounts (DLA)		105
Calculating Working Capital (Net Current Assets)		105
Calculating - Normalised Working Capital/Target Working Capital/Working Capital PEG		107
Low Water Mark Working Capital Over a Twelve-Month Period		108
Methods for Managing Working Capital During a Business Sale Process		109
Chapter 10 - What About Commercial Property?		112
1 - The Property is Removed (de-merged) from the Company Prior to Sale and Rent is Added		113
2 - The Property is Left In the Business		113
Additional Considerations		114
Chapter 11 - Confidentiality Matters		115
Staying Confidential		117
Chapter 12 - Working with Advisors		119
Which Advisor?		120
What Role Does the M&A Advisor Play?		121
Can a Buyer Buy a Business Without Help?		123
Chapter 13 - What to Expect Post Sale		126
The Hand Over		127
Chapter 14 - The 5 Steps to Scale Up Your Acquisition – Paul Avins, The Grown Up Business Coach		129
Chapter 15 - Basic Business Buyer Education		136
Chapter 16 - Potential Challenges During the Process		140
Poor Books and Records		140
Declining Financial Results		141
Lack of Cash at Closing		142
Lawyer Issues		142
Accountant Issues		143
Choosing the Wrong M&A Advisor		144
Dishonesty		145
Not Building Trust with the Buyer and Seller		145
Landlord and Premise Lease Issues		146
Partnership Issues		146
Not Really Ready to Sell		147
Unreasonable Financial Expectations		147
Lack of Timely Follow-Up		147
Bank Issues		148
Government Issues		148
Chapter 17 - Next Steps		150

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