Are you ready for investment?
Edward Barnes, head of corporate commercial, discusses growth strategies for business leaders.
How is your business structured?
Getting this right is crucial and can save time, money and enable potential tax reliefs if done at an early stage. Are you a sole trader or partnership and, if so, would it be better to become a limited company or Limited Liability partnership (LLP)? Do you actually have more than one business within the same structure? If so, separating those businesses out could:
- provide both flexibility (as an investor may only want to invest in one business) and clarity if one only one of those businesses needs to acquire to grow, or to licence out in any franchising model.
- ring-fence and manage risk if one of the businesses is inherently risker that the other which could make the combined business less attractive for investors.
Any business should be prepared for an investor to really delve into its history, operations and assets and if any information an investor is asking for is sensitive, always consider putting in place an NDA (non-disclosure agreement) before detailed discussions get going.
Any investor will want to see that all the necessary records, policies and procedures for your business are in order before investing. These include clear maintained accounts, up to date company books and filings at Companies House, written supplier and customer terms of business, leases, and written contracts of employment and policies. Without these an investor may decide to invest less or be put off from investing altogether.
We can advise you on what is needed and can also go through a dummy due diligence process asking the same questions any investor will ask, so you are prepared well in advance.
Get the right advisors
Your lawyers and accountants may be very good at what they do but do they have experience and expertise in the specialist areas of mergers, acquisitions, investment or licensing work? As well as making sure your interests are better protected, transactions tend to proceed much more quickly and smoothly when experienced advisors are engaged.
Good corporate finance advisors will also add value and have real expertise in finding potential investors or business partners and brokering deals.
Is everyone on board?
Make sure the all the management team and owners agree with the growth strategy. Looking to expand by way of acquisition, licensing or inward investment can be a stressful process which will only be made harder if some of your team are not committed. If the business is a family business, do some want to retire or exit the business now or will everyone remain for the journey?
Owners and managers should also consider the emotional side of handing over to or sharing the ownership or management reigns with third parties which will inevitably happen with any third party investment. Do you know of other friends or contacts who have been through a similar process – how did they find it? Do they also have experience of the investor and working with them? Completing the deal is only part of the equation.
To discuss any of the issues covered in our Growth strategies for business leaders blog, please contact Ed Barnes.
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