Skip to main content

Make an enquiry







    Contact Us

    Preston Office
    Tel: 01772 258321
    DX: DX 714573 Preston 14
    Fax: 01772 258227

    Garstang Office
    Tel: 01995 607950
    DX: DX 63970 Garstang
    Fax: 01995 600897

    Kendal Office
    Tel: 01539 628042
    DX: DX 714573 Preston 14

    Lancaster Office
    Tel: 01524 548967
    DX: 63502 Lancaster

    Clitheroe Office
    Tel: 01200 422264
    DX: DX 15154 Clitheroe

    Email: enquiries@harrison-drury.com

    Structuring a business sale following coronavirus

    Share

    Kerry Southworth, solicitor in the corporate team at Harrison Drury, looks at some of the options for structuring a corporate deal at a time when some valuations will be diminished. 

    With some buyers likely to be more cautious in the months ahead, not to mention the true valuation of some businesses being tough to calculate due to economic uncertainty, what’s the best way to get deals done and ensure a smooth business exit?

    Commonly, parties agree a business valuation based on historic financial reports and future projections. However, many businesses will be facing a reduction in revenue, and the uncertainty makes it difficult to accurately forecast.

    Alternative ways of valuing a business

    For example, a business that’s seen sales dip over the past few months may make a strong recovery and see revenue increasing even a year from now.

    A way around this potential blockage is to look at alternative valuations, including earn-out mechanisms based on actual future performance. This gives the seller a fighting chance to recover a more accurate valuation by allowing the business time to recover.

    Parties also need to consider the structure of a deal. A seller expecting a straightforward exit may be surprised with a buyer reluctant to take on the full risk of the business in the current climate.

    Looking at the bigger picture

    An asset only acquisition, or taking a minority/majority stake, may serve as a risk allocation exercise. Alternatively, very risk averse buyers may look at partnerships or joint ventures to further share the risks of a deal.

    Such ways of structuring a deal can be positive move for sellers, who may then stand to benefit from the commercial experience a buyer may bring, ultimately adding to the value of the business over the longer term.

    In short, the current crisis may change the structure of a deal, but it’s certainly still possible to make the best of the situation which will present opportunities for acquirers and vendors alike.

    For further information on preparing business valuations and structuring your corporate deal contact Harrison Drury’s corporate team on 01772 258321.


    Questions & Answers

    Leave a Comment

    Leave a comment

    Your email address will not be published. Required fields are marked *


    x

    Manage your privacy

    How we handle your personal data

    The General Data Protection Regulation (GDPR) gives you more control over how companies like ours use your personal information and makes it quicker and easier for you to check and update the information we hold about you.

    As part of our service to you, we will continue to collect, use, store and share your data safely and securely. This doesn’t require any action on your part.

    For more detailed information view our Privacy Hub