Diamonds in the Rough | FTI Consulting

Diamonds in the Rough: Preparing a Business for Sale

Corporate Finance & Restructuring

December 21, 2018


This is the fourth article in our ‘Diamonds in the rough’ series. In this article we look at preparing a distressed business for sale. Ideally owners should avoid distressed sales but unfortunately this is not always possible.

Below we contemplate the steps business owners should go through to prepare their company for sale with the assumption the sale will not be conducted through a formal insolvency process.

It must be noted however that in some cases an acquirer may want the sale to be finalised through a formal insolvency process. This will be addressed in more detail in our fifth and final Diamonds in the rough article.

So, the decision has been made to sell the business. The drivers of this decision may be varied and include:

  • Other stakeholders may be driving the decision – such as banks or creditors;
  • The owner needs to step back from the business and no natural successor exists to take control; and/or
  • The capital invested needs to be re-deployed or a better return can be gained by investing in other opportunities.

The first step in the process is understanding the need and desire to sell as it often dictates how much time is available to prepare the company for sale. The next step is understanding the true value of the business. Value will be heavily influenced by the efforts in preparing the business for sale. The preparation process is all about determining where the diamonds sit in a business. Discovering the true drivers of value in the business and working out how these can be maximised and separated from the underperforming parts of the business is vital. Ask, do certain parts of the business need to be cut off now in a bid to drive up the value?

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