Guide to selling

We have created this comprehensive guide to selling your business – helping you to concentrate on the key points and avoid potential pitfalls.

It is designed as a sample of the expertise you can expect from The Royal Bank of Scotland. We intimately understand the process of selling a business: put us on your side and you will reap real benefits.

Of course, the guide is no substitute for tailored and personal support. If you already bank with The Royal Bank of Scotland, simply contact your Relationship Manager. If you don’t work with us at the moment, simply contact us to see how we can help realise your dreams.

When considering a sale, you will also need to talk to your legal and accountancy advisers.

• Your options – find out more

There are a number of deals available to an owner-manager wishing to sell. Here are the main options:

• MBO/Management Buy-Out
  Where the incumbent management team, usually with the backing of an institutional investor, takes over.
• MBI/Management Buy-In
  An outside team of managers invests in the business, often with institutional backing.
• VIMBO/Vendor initiated Management Buy-Out
  A management buy-out initiated by the vendors.
• BIMBO -management buy-in management buy-out
  A combination of outside managers and current employees buying the business.
• AIM -flotation of a company on the Alternative Investment Market
  A form of public listing, which is generally less onerous and expensive than a full listing, providing the owner-manager with an opportunity to sell some or all of their shares.
• Cash-out
  Taking cash out of a company through bank loans or other means. The shareholders borrow money against the value of the business, without selling any shares.
• Earn-out
  A provision written into a transaction that states the vendors will receive further payment if the business they have sold achieves specified performance levels. This normally involves the vendors continuing to work in the business.
• Trade sale/Sale to another company or individuals
  Where the company is sold to a competitor or other firm.
• Find out more
  You can read more about the different types of deal in Beyond Tomorrow – a guide to selling your business.

• Sellers checklist – find out more

• Case study on selling – find out more

This case study gives you a detailed insight into a recent deal we helped to finance.

Find out more

You can read more case studies in Beyond Tomorrow – a guide to selling your business.

• Dantex: the business and the deal
• Company history
• Seller
• Why sell?
• Process
• Advisers
• The role of the bank
• …in hindsight
• Advice to others
• Dantex today
• Find out more

Dantex: the business and the deal

Dantex supplies printing plates and associated products in the printing industry, specialising in the packaging industry sector. The deal was a management buy-out from a family member.

Company history

Brothers, Richard and Jerry Danon, founded Dantex in 1967. Following their initial careers in textiles, they set up Dantex to merchandise fine English worsted. The textile trade in the UK was in terminal decline at this time, and the brothers diversified into the print industry, importing and selling printing products into the UK market. This grew rapidly and, from the early 1970s, the firm entirely focused on the print market. The business grew on the back of supplying specialist printing plates to the packaging print market, eventually becoming master distributor for a Japanese supplier. Dantex today is the largest distributor in Europe for letterpress photopolymer plates, with growing interest in flexographic printing plates and a manufacturer of related plate processors, with overseas subsidiary companies and a network of distributors covering some 30 countries.

Seller

Richard Danon founded the company 40 years ago, and is the Managing Director.

Why sell

The two brothers had been in business together for 40 years, building one of the leading companies in its field. Jerry Danon, following a difficult period in his personal life, decided that he wanted to spend more time with his partner, travel the world and enjoy the fruits of the decades spent building Dantex. Richard was still enjoying running the business, finding it stimulating, and didn’t think it was time to sell.

Process

As Richard recalls, 'It is all about timing. I wanted to take the business on, and in my brother I had a willing seller.' Having jointly rejected the notion of a trade sale, they set about the process of transferring ownership to Richard. From the start, they conducted the process in a spirit of goodwill; as Richard said 'The last thing I wanted was to gain a business and lose a brother, so we structured something that was fair to both of us.' Richard gave Jerry a blank sheet of paper, and asked him to put down what he wanted for his share of the business. Richard found Jerry's estimate equitable and they set about the process of completing the deal. Richard approached his close friend within a well known accountancy firm, who put them in touch with David Mountain, Head of Structured Debt Solutions at RBS in Leeds. The process ran smoothly from there on in, although inevitably there were odd hiccups.

'Whenever there was a problem, Jerry and I sat down together and sorted it out rather than going through lawyers. There is nothing to fear if you have a good relationship and you both want to resolve the problem,' said Richard Danon.

Advisers

The advisers that Richard Danon used can all be characterised as coming from long, trusting relationships: NatWest, part of the RBS group, had been their bankers for 35 years; DLA, a firm of solicitors in Leeds, had been advising Dantex for a long period; and PwC was also the auditor of the company. Richard had nothing but praise for all the advisers he used, reflecting the goodwill that characterised the whole transaction. The group of advisers 'acted as a team' according to Richard and 'it ran smoothly and finished smoothly.'

The role of the bank

Through the long relationship Dantex had with NatWest*, the Structured Debt Solution team knew the strong financial position and track record of Dantex. Nevertheless, it required some creative thinking to come up with the package of financing that was required to complete the deal: 'Our contact at RBS, David Mountain, was the creator of this deal, he came up with a great solution. He could see our strong balance sheet and was able to meet our needs.'

...in hindsight

‘In hindsight, I wouldn’t do anything differently. It was the best option open to us, and it ran smoothly to a conclusion. Our advisers were fantastic.’

Advice to others

‘The key to a deal of this sort is timing; choosing the right moment to do the deal. Once the time is right, you should try to be reasonable throughout, looking to sort out problems face to face rather than resorting to communication through lawyers.’

Dantex now

The deal was completed in August 2006. The business is performing well and according to Richard, ‘We are paying off the loan three or four times faster than required. We are trying to get rid of it as soon as possible, so that next time we take on a loan it will be ‘more constructive’ to finance an acquisition of our own.’ The deal worked out well for Jerry Danon too, and he is enjoying his life of retirement.

Find out more

You can read more about the sale and negotiation process in Beyond Tomorrow – a guide to selling your business.

* NatWest is part of The Royal Bank of Scotland Group

• Common questions on selling– find out more

• Is now a good time to sell?
• How will my management team be able to fund the deal?
• What is the best way to value my business?
• Who should I talk to first?
• What is the biggest issue most sellers face?

Is now a good time to sell?

The truth is that there often is no such thing as a ‘good’ or ‘bad’ time to sell. However, a good business is always a good business.

How will my management team be able to fund the deal?

Financial solutions such as invoice finance, commercial mortgages and leaseback deals can all help bolster the buyer’s finances. We have years of experience in constructing imaginative and tailored deals which suit the needs of both parties.

What is the best way to value my business?

Your accountant can advise you on standard valuation tools, such as earning multiples. However, the true value is quite simply what someone is prepared to pay.

Who should I talk to first?

We recommend discussing a potential sale first with your bank, then with your professional advisers. It’s vital to ensure your accountancy and legal teams have particular expertise in business sales.

What is the biggest issue most sellers face?

Many owners find it difficult to stay focused on running their business during the sale process. That’s why it’s essential to appoint a highly experienced team of advisers.