Before the process of selling your automotive business begins, you should consider the main objectives for sale, and the goals you wish to achieve. Developing an exit strategy early on also gives you time to research the market, and better understand what buyers are looking for.
With the help of professional advisors, and possibly a business broker, information can be distributed to potential a buyer that presents your business in the best light. But what industry challenges might you be facing?
In the drive to cut CO2 emissions and meet strict European targets, the industry has to continually invest in new technologies, and move towards the development of advanced electric vehicles.
Automotive companies face considerable uncertainty as we leave the EU. Failing to successfully negotiate a free-trade deal with Europe could adversely affect ongoing investment in the UK automotive industry, as well as the recruitment and retention of workers from EU member states.
The industry is facing a skills shortage despite the significant investment already made in training and apprenticeships. The introduction and development of new technologies has also introduced a need for further training of existing staff.
Car buyers are using social media to gather information, read reviews, and make purchase decisions. Many automotive businesses have had to move away from their traditional advertising campaigns and product launches, to engage with customers on an ongoing basis via social media channels.
If you’re thinking of selling your manufacturing or repair business in the automotive sector, you may have considered - how much is my automotive business worth? We have over 60 years’ experience in the trade of business disposals and acquisitions, bolstered by our in-house, valuation team who are veterans in the field of business transfer. We can calculate the monetary value of your business, giving you guidance towards a possible sale price for your automotive business, repair centre or garage.
The process of valuing an automotive business requires careful consideration of more than just the profit and loss accounts – the Selling My Business team will delve into overheads, the gross profit margin and take a forensic approach into the analysis of 3 years’ worth of historic/recent accounts. Our free automotive business valuation service outmatches that of other business transfer agents as we eliminate the risk of under and overestimation and combine our extensive understanding of the industry.
"My garage consisted of a fully equipped workshop and dent removal service so I was interested in finding an experienced buyer. My automotive business was snapped up for higher than market value. I was very impressed with Selling My Business, having used other transfer agents in the past."
David – Garage & Automotive Repair Centre, Lincoln
To present your business in the best light, you need to make sure that your systems are working efficiently, and that management information is readily available.
Your buyer will be looking for cash flow stability, profitability, and an indication of customer satisfaction, so good credit control and management of stock is crucial to demonstrate that the business has solid foundations.
Within the sales memorandum, you need to include:
You may need professional assistance to put together the sales memorandum, also known as an information memorandum, but you should avoid providing detailed financial information at this point.
A business broker with previous practical experience in the automotive industry can advise on what to include, and will also be able to negotiate with potential buyers on your behalf.
Once you or your broker has identified potential purchasers, the sales memorandum can be distributed, along with a projected timetable for the sale and a request for any opening offers.
You can then narrow down a shortlist of buyers, using their current financial situation and likelihood of being able to meet your terms. Once you have negotiated to a more advanced stage, a particular buyer may stand out from the others, at which point a Heads of Term agreement can be considered.
A detailed Heads of Term agreement is signed following in-depth negotiations with your chosen party, and this precedes a period of due diligence by the prospective buyer. They will want to ensure the information you have provided is accurate and reliable, and amongst other activities, will scrutinise your accounts, talk to some of your staff, and confirm which assets are wholly owned by the company.
The sales agreement marks the final step in the sale of your business. It is a detailed document that may include warranties or indemnities if your buyer is concerned about how the business will perform following the sale.
It is crucial that your legal advisor confirms the requirements for these prior to signing. They could involve you in a future claim for compensation if the information you have given is later found to be inaccurate.
Your buyer may also request and ‘earn out’ agreement whereby you remain in the business for a pre-agreed length of time, usually on a consultancy basis, and receive staged payments in addition to a reduced initial lump sum.
Selling My Business can help if you are trying to sell your automotive business. Our industry experts understand the challenges you face having advised numerous business people within the sector. Call one of our experts to arrange a free same-day consultation.
Contemplating selling your business? Our free, comprehensive guide will walk you through how you can sell your company. Our FREE guide covers all of the essentials, including:
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