Plan your sale for top returns

Over the next few years we’re likely to see a number of sales and mergers among mainstream travel brands, as businesses look to cut costs. The trick is getting your business financials in order before the rest of the crowd, ready to face thorough investigation by any prospective buyer. By following the steps below you can maximise the appeal of your company - and therefore your return.

First few steps

  • Get an independent valuation of your business to establish a base price, and adjust your expectations accordingly.
  • Seek tax advice early to outline likely tax liabilities resulting from the sale, and ways in which these can be reduced. Entrepreneurs Relief, for example, reduces the Capital Gains Tax on business assets.
  • Look to introduce or strengthen an executive management team so the business is not over-reliant on you personally. Consider encouraging these staff to stay long-term with share options such as tax advantaged Enterprise Management Incentives.
  • Ensure strong financial accounting controls are in place and all records up to date so that a buyer’s due diligence audit can be done smoothly.
  • Review and remove non-core assets that are not used in your main trade such as properties; reduce or eliminate low-margin products; identify cost savings; and reduce risks within the business.
  • Check all legal agreements and contracts are readily available for review.
  • Prepare an operations and processes manual that shows all the functions of the business - how things are done, the major customers and suppliers, samples of advertising, and any information that would help a new owner.
  • Prepare to work as a consultant following the sale to ensure a smooth transition.

Approaching the market

Now you are ready to put your business on the market, hire a corporate finance adviser with experience of selling a travel company of the same size. They will help the sale go through for the best possible price and with minimal disruption by supporting you in these key steps:

  • Prepare a sales memorandum explaining the principles of your business as well as its historical and projected financial performance, then distribute it to potential buyers under a confidentiality agreement.
  • Seek initial offers and whittle down a list of potential buyers.
  • Invite best and final offers before proceeding to a non-binding outline of the deal known as heads of terms.
  • Grant the buyer an exclusivity period during which due diligence can be carried out, and manage issues arising from it.
  • Instruct lawyers to draft the Sale and Purchase Agreement.

Reaping rewards

Many factors will influence the amount you receive for your business, but by making preparations up to two years ahead of the sale you can boost its worth considerably. Planning your exit at the right point on your company’s growth curve will give an adviser a powerful bargaining weapon.

For more tips, visit our selling your business page.

This article first appeared in TTG in November 2011.

Contact us

For further information on selling your travel business, please contact Andrew Burnham or a member of our Corporate Finance team.