Deacons - Preparing your business for sale
If you are considering the sale of your franchise network (or any business), the importance of preparation cannot be overstated. There are a number of steps that a prospective vendor should undertake before the business is put on the market in order to maximise the value from the sale.
One step that can often be overlooked is the need to conduct some initial internal due diligence on your business. A prospective purchaser will almost always insist on completing some level of due diligence on the business being acquired. If you conduct your own high-level due diligence in advance you should be able to identify issues of potential concern to the purchaser in advance.
As well as giving you time to formulate strategies to address each issue you will appear more professional to prospective purchasers and you may reduce the overall transaction costs (particularly if there is multiple potential purchasers) and increase the ultimate purchase price.
Some of the steps that should be considered include:
- conducting an intellectual property audit;
- formalising relationships with key suppliers (particularly if you receive rebates from these suppliers);
- conducting an audit of franchisee files for compliance issues;
- collating all material contracts into a central contract register; and
- preparing a comprehensive asset register of all plant and equipment.
Another important step to be undertaken early in the process is to get an understanding of the tax consequences of the sale and whether structuring the transaction in a particular way will maximise the net benefit of the sale for the vendor. There are a range of tax consequences that need to be considered, including capital gains tax, stamp duty and GST and it is important to consider these issues early so that you can advise prospective purchasers of your preferred structure from the outset.
If you are thoroughly prepared for the sale of your business then you will be in the best position to maximise your returns from the transaction. Even if a sale is not a short term goal there are a number of simple steps that can be taken now that will save significant time and expense when it comes time to selling your business in the future.
Deacons is Australia's leading franchise law firm, with offices in Melbourne, Sydney, Perth, Brisbane, Canberra and in 11 locations in Asia. We have assisted over 200 franchise companies, from large international corporations to start up franchisors. We do not handle franchisee matters.
Contact Norton Rose
Tel: 03 8686 6000
Fax: 03 8686 6505
