Financials
Enhancing and protecting value: Building confidence through your financials
Numbers speak louder than words
In any sale process, the financials come under significant scrutiny. Buyers and investors often base their offers on revenue or profit, so it has a direct impact on the price you will achieve. In addition, the quality of your management information says a lot about your business. It’s therefore vital to make sure that your financials inspire confidence and supports the sales narrative you want to communicate.
High quality reporting information
Both buyers and investors rely heavily on the financials to provide comfort on their investment decision. The level and granularity of information they want to see can be extensive, and often goes beyond what you would normally use to run the business. Ensuring you have a robust financial model and reliable finance systems that can produce detailed, regular reports is the first step. Having direct access to the information you need will reduce the burden on your finance team and allow them to focus on the more strategic elements of the process, as well as managing the day job.
Strategic acquirers and investors are scrutinising numbers more than ever. Commissioning a vendor sell-side product like vendor assist or due diligence helps tell the story behind your numbers and prevents surprises.
JOHN PRICE
Transaction Services Partner
Ensure your house is in order
Ensuring your management information is clean and accurate isn’t just about compliance. It also sends an important message to buyers or investors – that you are a professional and well-managed business. Taking the time away from the spotlight of a process to confirm your revenue recognition policy, cost allocation, write-off bad debts and make the appropriate provisions means you can present your numbers with confidence. Crucially, you will demonstrate an integrity to buyers and investors that builds trust in you and your business.
Optimise your working capital
Businesses are typically bought cash-free and debt-free. This means an agreed amount of surplus cash and working capital can be added to your proceeds – in some cases significantly enhancing the net proceeds vendors receive. Accelerating the resolution of payment disputes and cash collection, negotiating better terms with suppliers, and improving operational procedures to shorten stock holding cycles, will enable you to present a stronger position later in the process. However, it takes time to implement. Buyers and investors will also want to make sure any improvement is sustainable and will thoroughly diligence your working capital needs. Optimising your working capital cycle can add significantly to value, but it needs to be started early to be effective.
The information you need to sell your business is different to what you need to run it.
Package your financials
Commissioning vendor assist or diligence brings a number of benefits to sellers. Both products present a detailed picture of your financials in a way which showcases key trends and reduces uncertainties. By preparing these reports in advance, you have a clear understanding of the messages being communicated, giving you the opportunity to address potential issues or misunderstandings before a process starts. When combined with data analytics, vendor assist and diligence reports package your information in a way that can be easily digested by buyers and investors. They also allow sellers to keep more parties in the process for longer, providing more control and reducing the scope for last minute reductions to price and terms. Increasingly, investors and some strategic buyers have an expectation that vendor due diligence will be available – especially for premium businesses looking for a high valuation.
In a competitive market, being well-prepared with packaged financial information demonstrates professionalism and readiness, giving you a competitive advantage.
Investing in sell-side financial packaging will enhance confidence in your business, the value you can achieve and give you control over the process.
How we can help
In any sale, the numbers come under a lot of scrutiny, putting significant strain on the finance function and leadership team. Ensuring you have robust, granular management information and that your financials support your sales narrative is essential to achieving the best terms.
Our deal services experts can support across a wide range of financial areas – from accounts preparation, agreed principles reviews, and secondments that provide additional bandwidth to your finance team, to flexible financial models, complex consolidations and vendor due diligence that provides assurance to your deal.
