The complex process of selling a business is often compounded by specific issues within an industry. As far as entertainment is concerned, the broad range of business types - from digital companies to print media and advertising - means that even appointing a suitable advisor takes a little more consideration.
If you are looking to sell an entertainment business company, there are multiple sub-sectors which you may be involved in which may be influenced by your client and the brief. From hosting live entertainment for private events to entertainment fit for industry exhibitions, your entertainment management company may offer a broad range of tailored packages for private and corporate clients. There are many niche entertainment businesses which populate the industry to cater to multiple entertainment needs, such as:
Due to the creative nature of the entertainment industry and the demand for a multi-faceted service, entertainment businesses regularly enlist the services of contractors and sub-contractors to combine skills, talent, and knowledge. This is a cost-efficient way of operating as it minimises overheads and eases company cash flow. By building an extensive record of reputable industry contacts and partnerships, you can increase the value of your entertainment business and refine service delivery. The entertainment sector also supports numerous industries from hospitality, leisure, and travel.
To prepare your entertainment business for the sale process, you will need to collate key information for the attention of prospective buyers and conduct a valuation of your company to determine how much it is worth. The first official notification to interested parties that your business is for sale is the Information Memorandum.
The Information Memorandum document includes general and financial information about the company. Buyers will want to know:
‘Why are you selling the business?’ is often the first question asked by prospective buyers and should be clearly articulated. If you cannot state plainly the reasons for selling, this could arouse suspicion amongst buyers, deter them from considering a sale and adversely impact the sale price.
The financial section provides details on how the business is run, the services/products you sell, why they are in demand, your customer base, and an outline of the company’s financial health.
You will need to provide business reports, asset valuations, details of your liabilities, turnover/profit and loss statements, as well as forecasts for future turnover and profits. Taking this into consideration, what issues might affect a potential buyer’s decision on whether to go ahead with the purchase?
Your business model determines the ease with which you can predict future turnover. If you have subscriptions/memberships or service contracts, you can forecast this with greater accuracy, at the same time instilling confidence in a buyer that a solid financial base already exists. Businesses such as those dependent on ad hoc advertising deals may struggle to provide revenue forecasts with sufficient accuracy.
Entertainment businesses by their very nature are labour intensive. Associated high staffing costs can seriously deplete profit levels, potentially discouraging buyers who are interested purely in future profits. As a result, many entertainment businesses employ temporary staff to cope with demand and keep expenditure to a minimum.
Creative industries are generally viewed by investors as a high-risk option. For this reason, it can be difficult to obtain finance in entertainment, although peer-to-peer (P2P) lending and crowdfunding are increasingly used as alternative sources.
Before issuing the Information Memorandum, it is a good idea to draw up a comprehensive confidentiality agreement to protect your business from competitors seeking business intelligence.
The power of advertising and attracting a target audience is a campaign familiar to the entertainment industry than any other. Celebrating over 60 years’ in the business transfer industry, we have professional relationships with over 10,000 interested buyers actively searching for an entertainment business. We can maximise exposure for your company through our extensive promotion strategy and our in-house, valuation team will guide you on how to value an entertainment business.
We offer a free entertainment business valuation to help you calculate the worth of your company and establish a guide asking price. By taking into consideration company assets and liabilities, you can accurately estimate company worth and avoid selling the company for a lower price. Entertainment businesses are often asset rich due to high volumes of stock, props, and production equipment owned by the business. If company machinery or industrial equipment is afforded through an active hire purchase agreement, this debt will be included when calculating the worth of your entertainment business.
By calculating the value of your entertainment business, you can tailor your advertising strategy to target buyers with the necessary financial status to consider a sale. Valuing an entertainment business is one of the first steps you will take to prepare your business for sale. This starting point can help you conduct financial planning in advance, both personal and business, and provide you with a clear roadmap for the future.
"The service from the SMB team was exceptional from start to finish. My production company has a rich history and a strong track record, so working hand in hand with experts helped me reach the right buyer."
Linda - Television Production Company, Bristol
Once you have received an offer, you will need to see evidence of the buyer’s ability to pay - this is generally provided using bank statements or share certificates. The buyer may request that you remain in the business for a transitional period, so they can make use of your knowledge and experience and assist with any immediate problems post-sale.
This could be on a consultancy basis or using an ‘earn-out’ arrangement which is particularly useful if your buyer disagrees on the price, and you are agreeable to remain in the business for a certain length of time.
In this instance, a percentage of the purchase price is deferred, with payment being dependent on the business achieving certain financial goals during the specified time. Conducting due diligence will help you confirm the financial position of the buyer and eliminate any uncertainty.
Once preliminary terms have been negotiated, a Heads of Term Agreement, also known as a Letter of Intent, can be drawn up. This may or may not be legally-binding but sets out the terms agreed in principle and signifies a move to the next stage of the selling process.
Protecting intellectual property is often a crucial consideration for entertainment businesses. Your most valuable assets, from intellectual property including trademarks, patents and copyrights, should be registered and updated.
If a buyer discovers that intellectual property is unprotected when carrying out their due diligence, they may disengage from the deal, or alter their offer to reflect this. They also have the right to use warranties or indemnities to protect themselves from potential problems in the future.
The entertainment sector is experiencing a tidal wave of change due to the coronavirus pandemic. As Covid-19 trading restrictions decimate footfall, the entertainment industry which is highly dependent on physical attendance is experiencing a host of trials and tribulations. As the sector braces itself for economic uncertainty due to the long-term impact of Covid-19 and Brexit, new businesses embracing innovative technology are being birthed in the entertainment sector.
As entertainment agencies adjust their services to comply with Covid-19 secure guidelines and social distancing measures, they are entering the online marketplace to secure business survival. To secure a lifeline and showcase business endurance, entertainment services are tapping into the online world to preserve customer relationships and add value. To adapt to changing consumer habits, embrace trends and new technology, business in this sector are required to operate with agility. Theatre production, entertainment and media companies are finding innovative ways to partner with event companies by exploiting lockdown demand through online channels.
Live entertainment businesses are instrumental in orchestrating a vast array of events, such as festivals, sporting competitions, trade shows, industry exhibitions, performing arts events, theatrical productions, musical performances, and media events. As the coronavirus pandemic is leading to reduced physical contact and social distancing, the entertainment sector is regrouping and adapting to provide an experience in line with Covid-19 public health measures.
If your business requires restructuring support, you may be able to sell your distressed company to a turnaround expert actively involved in acquiring distressed companies. There is a dedicated market for the sale of ailing businesses which are typically revived and resold for profit. The financial health of your business will significantly impact the value of your company and the type of buyers your business is likely to attract. Selling your financially distressed entertainment company may offer an ideal exit route and a realistic alternative to company liquidation. By generating returns and transferring ownership to a suitable buyer, you can recycle your entertainment business.
Professional business sale advisors with a targeted specialism and practical experience in your field will be best placed to help you navigate issues, ensure priority goals are met, and avoid making post-sale commitments that are difficult to maintain.
For more information on selling your entertainment business, contact one of our professional advisors. Selling My Business has a team of business sales and finance experts with specialisms in the entertainment industry brought about by decades of experience – allowing us to provide the tailored advice you need.
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:
• Are you appointing an experienced advisor?
• Are you giving your business a realistic sales price?
• Will all potential buyers for the business be approached?
• How much will the sales process impact business performance?
Plus much more...