December 2023 - Bay of Plenty Business News

14 BAY OF PLENTY BUSINESS NEWS December 2023
LAW
“You want to be prepared, deliberate and intentional – don’t give your
accountant and your lawyer a back-of-a-napkin proposal”
Looking to exit
your business?
Don’t leave it too late
The prospect of buying or
selling a business is top of
mind for many people now
the general election is over.
Election pledges to lower tax
cost and compliance, change
employment law, improve cash
flow, cut red tape and provide
better access to capital for small
business owners, have left people
buoyed at the prospect of better
economic times ahead.
Commercial law specialist
Andy Martin says a good window
is now available for people to
prepare their business for sale –
but warns many owners leave it
far too late to connect with their
advisers.
“You want to be prepared,
deliberate and intentional – don’t
give your lawyer a back-of-a-napkin
proposal and tell them to settle
it in two weeks. You may have
negotiated a perfect exit but nine
times out of 10, people who take
a bit more time, have a deliberate
focus and are willing to take
advice will achieve far better
outcomes.”
Andy worked for Buddle
Findlay in Auckland for 15 years
before moving to Tauranga earlier
this year to join Cooney Lees
Morgan’s Corporate and Commercial
team as Special Counsel.
He has a broad corporate
and commercial advisory practice,
with a focus on mid-market
mergers and acquisitions.
He says Cooneys has already
noticed an upturn in corporate
commercial legal activity and
he predicts that trend is likely
to continue under the new
government.
“There’s a lot of small to
medium business owners who
have been waiting for the uncertainty
of an election to dissipate
before making big decisions as
they want a bit more confidence
around the economy. And there
will be buyers and investors who
were sitting on their hands for
the same reason.”
But Andy warns there’s still
not a lot of government money
to go around and the economic
environment won’t change overnight.
“The country is hugely in
deficit and will be for another
few years, so there won’t be a
bottomless lolly jar for helping
SMEs. But generally, business
owners appear to have more
comfort that their interests
may be slightly higher on the
agenda and have a more positive
outlook.”
Andy says a number of factors
suggest that merger and acquisition
activity in the SME space is
rebounding and could be poised
to rise in 2024, with one of the
key factors being an increasing
focus on exits and sell downs by
business owners as part of their
generational succession planning.
However, while interest
rates are forecast to start easing
next year, the current high cost
of capital means buyers will continue
to be selective with their
investments and acquisitions. So
now is the time to work closely
with your accountant and lawyer
to get everything in order.
“As always, business owners
need to work on their business
as well as in it. Businesses
have been operating in a tough
economic environment for the
last two or three years and may
have not had particularly good
growth, or could even have suffered
a bit of a decline. They’ll be
wanting to restore their trading
performance and increase their
enterprise value.”
Andy says owners who wish
to exit within the next year or
two should start looking at ways
to improve their business now
so it’s more attractive to buyers
– both from a financial perspective
by improving trading results,
and also from a legal perspective
by examining their business
structure.
“Speak to your lawyer and
accountant early. The earlier, the
better. It doesn’t have to be an
in-depth discussion. Just start a
conversation and get a realistic
idea of what’s ahead of you.”
Accountants can help frame
ANDY MARTIN,
Special Counsel, Cooney Lees Morgan
up financial reports to improve
a potential valuation, while your
lawyer will help assess what you
ultimately want to achieve from a
sale. Important issues to consider
include whether your business is
more suited for selling as a share
sale or an asset sale, the extent
to which a founding vendor
needs to remain in the business
to make sure the value is realised
for the purchaser, and the risk
profile that a vendor is prepared
to accept because every sale and
purchase agreement is different.
Owners should consider
whether critical areas of the
business need to be reviewed or
restructured. “There’s usually
low hanging fruit you can do
straight away, like considering if
you need to secure key customers
and suppliers with contracts,
making sure you own your IP,
resolving outstanding disputes
and examining your leases. Is
there anything else you can do
to make your business better
over the longer term, and therefore
more appealing to potential
buyers? A strategic review with
inputs from your professional
advisors may prove invaluable.”
Helpfully, Andy has written a
comprehensive article on what
to consider before selling your
business which is available now
on Cooney’s website.
“I recommend allowing at
least three to 12 months to properly
prepare your business for
sale.
At the end of the day, it only
takes one buyer and one seller
to make a transaction happen.
Talking to your advisers early
can help achieve the most productive
deal.”
Thinking of selling
your business?
If you’re interested in digging a bit deeper into how the process of
preparing and selling your business might look, I think you’ll find my
article “6 Things To Consider Before Selling Your Business” really helpful.
If you’d like to start a discussion about your full or partial business exit,
whether that’s imminent or part of a long-term plan, contact me or
another member of our Corporate & Commercial Team.
Andy Martin | Special Counsel: 07 927 0588 or amartin@clmlaw.co.nz
6 Things To
Consider Before Selling
Your Business
247 Cameron Road, Tauranga | cooneyleesmorgan.co.nz