Some of the key factors to keep in mind to maximise your return on investment when selling your business
For many business owners, especially entrepreneurs, an exit strategy is often a medium-to-long term goal set since the time of inception.
But day-to-day operations can mean critical elements of maximising exit value are overlooked.
Nathan Banks, managing partner of UAE-based law firm Banks Legal, explains key factors to keep in mind to maximise your return on investment when selling your business:
1. Licensing, permits and approvals: It is important to regularly review your business activities against existing licenses and permits to ensure compliance. Failure to do so may result in sanctions from government authorities, including fines or temporary suspension of your ability to conduct business, which could attract warranty claims or other liability.
2. Corporate governance: Make sure your business is compliant with the UAE Companies Law, your corporate structure supports the current operations of the business and future expansion, limits liability and protects investments. Whenever there are significant changes in the business, revisit the constitutive documents, shareholder and license agreements.
3. Intellectual property: Ensure your intellectual property is protected by registering rights or protecting unregistered intellectual property through contractual arrangements. Ensuring data is obtained legally and used in a legal manner.
4. Commercial contracts: Review all existing contracts to ensure they remain current and valid and contain key rights and protections to avoid price reduction opportunities. This is particularly important where future revenue streams are central to the valuation exercise.
5. Employee planning: Securing key employees is a condition of a successful exit. Ensure employment contracts and packages reward loyalty, have appropriate notice periods and include reasonable restrictive covenants - preventing competitors from poaching staff and ensuring staff cannot take confidential information or leave and take a client with them.