It has become clear that the worldwide economy is closely interlinked with our own and, therefore, events taking place around the globe can cause ripples which cause our own economy significant shock.  Now, having been rocked by the coronavirus pandemic, there is continuing and further instability yet to come. As a result, there is likely to be a chain reaction of transactional arrangements where companies are re-structuring, either through necessity or potentially also triggering opportunistic acquisitions of smaller entities.

Some entities will be looking to use the current circumstances as an opportunity to negotiate a ‘bargain’ and whilst people’s minds at the moment are dealing with a wide variety of challenging issues, it is fundamentally important to ensure that, if you are open minded to an acquisition or merger, any business is ready for such an attempt, should it occur. If a business is prepared for such an eventuality then it is not only likely to have greater appeal, it is also likely to receive a higher value than a business in a state of disarray (or at least not suffer from as many last minute price reductions).

What must you consider?

There are a number of measures that can be taken to best prepare business for an external restructuring and these measures are largely compliance related but can also include certain commercial and legal considerations as has been set out below: –

• Are your contracts up to date and effective? This can include both your own trading terms with consumers but also terms on which you trade with your own suppliers.
• Is there a management system in place for the business to run itself or is the involvement of certain individuals integral? (such as owner managed businesses). It may be an opportunity to consider delegating a wider variety of tasks should certain individuals be of such importance.
• Does the idea of working with an acquiring entity appeal to you or is it your intention to “draw a line in the sand” and move on completely. If you intend to move on without any ongoing involvement, it is of even greater importance to ensure that the business is self-sufficient.
• Do you have ongoing accountants involvement? It is fundamentally important to ensure that all records are up to date, not only to streamline potential financial due diligence but to also assist in establishing a value for your business. This is particularly emphasised by the use of recent government schemes (such as the Job Retention Scheme) as further compliance processes are to be followed as a result.
• Is it likely that all shareholders would be willing to sell should the opportunity arise? If there is uncertainty surrounding this idea, it may be worth raising the subject sooner so as to ensure that should an opportunity arise it is not then lost should a buyer wish to acquire the whole share capital of a company.
• Ensure that all health and safety, insurance and data protection policies up to date.
• Do you have your company books up to date? Do you know where you can access all relevant board minutes, shareholder resolutions, purchase and sale contracts for previous transactions (share or asset purchases/sales which have taken place in the past)?

The process of selling a business can often be a long and arduous process (whether that be now, or at more ‘normal’ times) that can be carried out much more effectively by simply considering at least some of the above issues in advance.

For an initial discussion or for further advice, please get in touch with Wards’ Head of Corporate Commercial, Marina Maclennan at marina.maclennan@wards.uk.com, or Solicitor Ciaran Keane at ciaran.keane@wards.uk.com.