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Is it time to sell up?

Unlike the British summer, the year leading up to July was hot if you had anything to do with mergers and acquisitions activity in construction. By Nigel Shilton

Unlike the British summer, the year leading up to July was hot if you had anything to do with mergers and acquisitions activity in construction.

Unfortunately July saw the markets turn in a credit crunch that visibly cooled the global financial markets. So is now a bad time to sell your construction company?

While the credit crunch may have dampened the atmosphere, the new chancellor has stoked the market again with his Pre-Budget Report.

There are now tax benefits for those acting sooner rather than later after the decision to change capital gains tax.

Disposal of shares

By 6 April 2008, the Government is increasing the tax payable on profits from the disposal of shares from 1 per cent to 18 per cent. Owners and investors who had planned to sell their interests in a business in a year or two's time should consider selling now, rather than lose an additional 8 per cent in tax.

If you are the owner of a construction sector business looking to retire to Spain you might want to consider an offer. The question is how would you go about selling?

To get the ball rolling there is some internal housekeeping to do first like ensuring your management information (including financial reports, contracts, progress reports, valuations) is well managed and transparent and that you have absolute clarity about your projects' health, both good and bad.

Don't worry if there are some skeletons in the closet; a potential buyer will expect a few poorer performing projects. It's better to know where the bad projects are and show you are taking action.
The next step is to get some professional advice, both corporate finance and legal. The corporate finance advisors can give you a sense of the value of your business and guide you through the sales process.

It would be wise to hold some sort of beauty parade to choose one. Look at their track record, and make sure you are comfortable you can work as a team.

A crucial step will be producing an information memorandum, a document that demonstrates the value of your business. It includes key financials, operating performance, recent projects and details of the management team.

Potential buyers

You and your CF advisor will draw up a list of potential buyers. Your advisor will have good knowledge of who is likely to be looking in the market in addition to any inquiries you have had, and also whether you would consider approaching a competitor.

From the long list of indicative bids provided you then reduce it to a shortlist of about two or three in order to maintain competitive tension, and to provide an arena for detailed negotiations.

They will want access to a data room - hence the importance of good housekeeping - and conduct due diligence etc.

Then it is just a case of closing the deal from both a financial and legal perspective.

Nigel Shilton is a construction partner at Deloitte