selling my shares in my company advice appreciated

[Leeds66]

Hi all,

We’re currently considering selling our company, and one of the interested parties is both a supplier and an investor. Their offer is significantly below what we believe the business is worth.

We're exploring the idea of selling up to 70% of the company instead — potentially to another factory (to secure a £4 million per year supply contract) or to a DTC brand that sees value in what we’ve built.

From my understanding, as long as we sell less than 50%, the investor's preferred share rights wouldn’t be triggered, and I would retain the remaining shares and continue as CEO.

I have a specific clause in our Shareholders' Agreement that I believe supports this, but I’d really appreciate it if someone could confirm:
If we sell less than 50% of the company, are we correct in thinking that the preferred shares wouldn't become payable to the investor, and that I’d be able to retain the proceeds from the sale (i.e. the wholesale value)?

Thanks in advance for any insights or experience anyone can share!

Sorry im new to this

A ‘Share Sale’ which triggers proceeds being distributed as set out at 3.2 below is broadly a sale of shares
(in one transaction or a series of transactions) resulting in the buyer acquiring an interest in shares
constituting more than 50% of voting rights attached to all shares (and holders of Ordinary Shares have
one vote per Ordinary Share and holders of Preferred Shares have the number of votes they would have
had if their Preferred Shares had been converted to C Shares).

 

[Chris Ashdown]

Why are you on the forum asking for advice when you need to talk to the solicitor who wrote your shareholders agreement for advice, far to many IF's for anyone else to give sound advice

Hi all,

We’re currently considering selling our company, and one of the interested parties is both a supplier and an investor. Their offer is significantly below what we believe the business is worth.

We're exploring the idea of selling up to 70% of the company instead — potentially to another factory (to secure a £4 million per year supply contract) or to a DTC brand that sees value in what we’ve built.

From my understanding, as long as we sell less than 50%, the investor's preferred share rights wouldn’t be triggered, and I would retain the remaining shares and continue as CEO.

I have a specific clause in our Shareholders' Agreement that I believe supports this, but I’d really appreciate it if someone could confirm:
If we sell less than 50% of the company, are we correct in thinking that the preferred shares wouldn't become payable to the investor, and that I’d be able to retain the proceeds from the sale (i.e. the wholesale value)?

Thanks in advance for any insights or experience anyone can share!

Sorry im new to this

A ‘Share Sale’ which triggers proceeds being distributed as set out at 3.2 below is broadly a sale of shares
(in one transaction or a series of transactions) resulting in the buyer acquiring an interest in shares
constituting more than 50% of voting rights attached to all shares (and holders of Ordinary Shares have
one vote per Ordinary Share and holders of Preferred Shares have the number of votes they would have
had if their Preferred Shares had been converted to C Shares).

 

[WaveJumper]

As above you need proper legal advice plus I would also suggest accountant & tax advice so nothing comes back to bite you where it hurts

 

[Mark T Jones]

I'd agree with both of the above

Forums are great for getting a range of options and ideas - this is a detailed legal and technical matter that needs dedicated (paid for) legal and financial advice

 

[Lisa Thomas]

Mistakes will be expensive, especially with a contract of that size! I can recommend a solicitor and accountant if you don't find one on here. Feel free to dm me.

 

[Clinton]

I'm an M&A adviser, and I'll disagree with the above advice and recommend you don't go to a lawyer at this time.

Hi all,

We’re currently considering selling our company, and one of the interested parties is both a supplier and an investor.

It is so not wise to engage with someone like that unless you're professionally represented by a clued up business broker or other M&A player! The level of financial sophistication between experienced investors and the average business owners is phenomenal. They'll wipe the floor with you. If they are also suppliers, that's doubly dangerous as there are tons of mistakes you will make and not just ruin your chances of getting the best price but also jeopadise your existing business.

Also, over 70% of 'done deals' with such parties, deals where price has been agreed and Heads of Terms signed, fall through and do not complete. Pre-HoT, the chance of them pulling out is over 90% (yeah, yeah, yeah, even if they seem really, really keen). And by then they would have dived deep into your business and taken away a lot of juicy data!

Their offer is significantly below what we believe the business is worth.

Of course it is! The way to get closer to the figure you want is to prepare a proper Information Memorandum, market the opportunity properly, get 50-100 buyers in and build competitive tension.

That, I bet, is beyond your ability (which is why business owners use external expertise). That's what the average corporate finance firm / M&A firm does for every client they take on.

We're exploring the idea of selling up to 70% of the company

Are you aware of minority shareholding pricing discounts ie. that once value is agree, a buyer would need to pay a premium for a 70% chunk and not just 70% of the value (as you'll be left with below 50% voting rights)? Do you know how to calculate this?

What about equity to EV bridges? How much of working capital are you required to leave in the business (including cash) to meet any offer a buyer puts on the table and how does that compensate for the net assets on your books.

Sorry im new to this

Yikes!

We don't know the size of your business, but if it's generating a profit of a few hundred thousand per year, I'd highly recommend you pull out of all these current 'buyers' and go appoint experts to advise you. Urgently!

Many corporate finance firms have in-house lawyers, or arrangements with outside lawyers, and could give you initial advice on the question in your OP. But you shouldn't even be talking with lawyers unless you've taken yourself out of the equation and appointed an M&A firm / advisory firm / corporate finance firm to handle the sale itself!

Mistakes will be expensive, especially with a contract of that size! I can recommend a solicitor and accountant if you don't find one on here. Feel free to dm me.

We don't know the size. The mention of a potential £4m contract could be a red herring. This could be a micro business, with under £1m in turnover and hardly anything on the balance sheet!

 

[Leeds66]

I'm an M&A adviser, and I'll disagree with the above advice and recommend you don't go to a lawyer at this time.



It is so not wise to engage with someone like that unless you're professionally represented by a clued up business broker or other M&A player! The level of financial sophistication between experienced investors and the average business owners is phenomenal. They'll wipe the floor with you. If they are also suppliers, that's doubly dangerous as there are tons of mistakes you will make and not just ruin your chances of getting the best price but also jeopadise your existing business.

Also, over 70% of 'done deals' with such parties, deals where price has been agreed and Heads of Terms signed, fall through and do not complete. Pre-HoT, the chance of them pulling out is over 90% (yeah, yeah, yeah, even if they seem really, really keen). And by then they would have dived deep into your business and taken away a lot of juicy data!



Of course it is! The way to get closer to the figure you want is to prepare a proper Information Memorandum, market the opportunity properly, get 50-100 buyers in and build competitive tension.

That, I bet, is beyond your ability (which is why business owners use external expertise). That's what the average corporate finance firm / M&A firm does for every client they take on.



Are you aware of minority shareholding pricing discounts ie. that once value is agree, a buyer would need to pay a premium for a 70% chunk and not just 70% of the value (as you'll be left with below 50% voting rights)? Do you know how to calculate this?

What about equity to EV bridges? How much of working capital are you required to leave in the business (including cash) to meet any offer a buyer puts on the table and how does that compensate for the net assets on your books.



Yikes!

We don't know the size of your business, but if it's generating a profit of a few hundred thousand per year, I'd highly recommend you pull out of all these current 'buyers' and go appoint experts to advise you. Urgently!

Many corporate finance firms have in-house lawyers, or arrangements with outside lawyers, and could give you initial advice on the question in your OP. But you shouldn't even be talking with lawyers unless you've taken yourself out of the equation and appointed an M&A firm / advisory firm / corporate finance firm to handle the sale itself!


We don't know the size. The mention of a potential £4m contract could be a red herring. This could be a micro business, with under £1m in turnover and hardly anything on the balance sheet!

can you dm me ?

 

[Clinton]

I sent you a DM. I can introduce you to the expertise you need but, but, but good advice in the M&A world doesn't come cheap.

Smart business owners pay the money they need to pay for quality advice. But there are plenty of fools who overestimate their abilities. or rely on Google / Facebook / forums / Reddit subs like Sell My Business or their mate, Steve, down the pub.

If you have a business with £5m+ in turnover, read my detailed article here on how the sale of larger businesses differs from the sale of smaller ones. It'll be an eye opener for you.

If your business has less than £1m in turnover, it's probably not sellable. There is very little buyer appetite for micro businesses. Businesses this size are usually heavily dependent on the owner (the person who wants to leave!) 95% of micro businesses that go to market do not end up getting sold. But they're great targets for all kinds of numpties trying all kinds of BS to take advantage of the usually clueless owners. That includes suppliers, competitors, £1 Charlies and others.

For businesses between £1m and £5m in t/o, the probability of sale increases a bit but a lot depends on the actual attributes of the business, the numbers, the level of risk involved (as perceived by buyers) and much more.

Partial sales, like the 70% you're considering, almost never happen in the sub £10m market. There are plenty of good reasons for that but it's a story for another time. My dinner is calling.

 

[M&ADeal-Leader]

Hi all,

We’re currently considering selling our company, and one of the interested parties is both a supplier and an investor. Their offer is significantly below what we believe the business is worth.

We're exploring the idea of selling up to 70% of the company instead — potentially to another factory (to secure a £4 million per year supply contract) or to a DTC brand that sees value in what we’ve built.

From my understanding, as long as we sell less than 50%, the investor's preferred share rights wouldn’t be triggered, and I would retain the remaining shares and continue as CEO.

I have a specific clause in our Shareholders' Agreement that I believe supports this, but I’d really appreciate it if someone could confirm:
If we sell less than 50% of the company, are we correct in thinking that the preferred shares wouldn't become payable to the investor, and that I’d be able to retain the proceeds from the sale (i.e. the wholesale value)?

Thanks in advance for any insights or experience anyone can share!

Sorry im new to this

A ‘Share Sale’ which triggers proceeds being distributed as set out at 3.2 below is broadly a sale of shares
(in one transaction or a series of transactions) resulting in the buyer acquiring an interest in shares
constituting more than 50% of voting rights attached to all shares (and holders of Ordinary Shares have
one vote per Ordinary Share and holders of Preferred Shares have the number of votes they would have
had if their Preferred Shares had been converted to C Shares).

What did you eventually do?