Selling a business is a hard decision and a very personal process. However, the process can be easier when you are prepared. There are many options when it comes to selling your business. Use his page to fully understand the plethora of ways to structure your sale and ultimately maximize your chances of success.
Selling All of Your Business
If you are interested in selling the entirety of your business, you’ll need to look at different ways to approach this:
- Selling the whole business as is
- Selling the assets of the company
Interactive can help you determine which route is best for your business.
Selling Part of Your Business
This might be an attractive idea for many business owners. There are a lot of options in regards to how much of the business you want to keep and what role you will want to play. This option will allow you to free up some time for other endeavors while still retaining some control and interest in your company. With this kind of sell, be prepared for a lot of negotiations with the buyer.
Another alternative would be a bigger company buying your business while you get some shares. You may only have a small percentage of ownership in the new company. The new company may be able to grow faster than your company could alone and even a small share can be quite lucrative.
Benefits of Selling Part of the CompanyThe main benefit of selling part of your company is the ability to release a large amount of this money while still keeping an interest and a part of the management of the company. You will no longer be the main director of the business, but you still have a say in how the company moves forward.
Selling a part of your company will likely leave you with more time to take on different projects. Even if more time isn’t made available to you, you will still be receiving money from the sales which will allow you to invest in other areas and diversify your expenditures.
Finding an Interested Buyer
Once you’ve decided on how much of the business you are going to sell, the next step is to find a buyer. Keep in mind that not all buyers may be interested in sharing a business; they could have plans to take the business to the next level and may not want to share the profits.
However, you have to take into account what most buyers are looking for in their purchase of an existing business. Potential buyers might be interested in your business for the money it will bring them while others may see it as part of their strategy plan for their existing business and then you have buyers who will wish to continue the business as is.
Most buyers are going to be worried about any hidden problems that could potentially cause the business to lose its value. Buyers will need assurance that the business is as it appears and that the money they are paying for it is an accurate value of the company.
One of the best tools to promoting the sale of your business is to prepare a selling memorandum. A selling memorandum should present all the important information about your company, its products, the industry and the market. The elements of this document are very similar to a business plan. Your memorandum is a marketing piece and a powerful tool in finding interested buyers.
Control of the Company
When determining how much of the company you want to sell, keep in mind that it will decide what percentage of control you still retain in the form of shares. If you sell more than fifty percent of the company, you will be giving up control because then you can be voted against. If you sell more than seventy-five percent, you will not be able to block special resolutions which will further deteriorate your control of the company.
If you have a Thai company with Thai shareholders and you own forty-nine percent of the company, you may be familiar with some issues of control. If the Thai shareholders are not active in your company in regards to voting and control, this would not change much other than the fact that you would be selling fifty percent or seventy-five percent of your shares only. While you may have been the minority shareholder in a Thai company, you probably still kept a majority of the control. Whereas with another foreign partner you will be sharing the control as well.
The exact control setup would depend on how your company has been structured, but would not change the fact that both you and the buyer will want to protect your share of the company. This would likely be done using the Articles of Association and/or a shareholders’ agreement.
If you have a Thai company, you may have a shareholders’ agreement in place. However, you’ll need to agree on the rights of both parties if you plan on bringing in a partner with whom you will have an active long-term business relationship with. The shareholders’ agreement might include things as what will need shareholders’ approval, restrictions on issuing new shares, how dividends will be paid and other important matters.
Although the company’s Articles of Association will help settle decisions to an extent, a fully considered and well drafted shareholders’ agreement will act as a safeguard. It will give you and your co-shareholders more protection in your business.
Many clauses in a shareholders’ agreement operate as voting agreements. The parties can exercises their votes as shareholders to put into effect agreed intentions as to how the company will be run and developed. This can include things like the activities the company will carry on, the company’s dividend policy, levels of borrowing and future funding.
Structuring the Payment
Lending options made available to foreign buyers may be very limited. This is the reason many sellers will opt to finance the sale themselves. Of course, it is a personal decision you will have to make after you carefully assess the buyer’s financial situation and your own financial situation. Keep in mind this practice is becoming more common and you could have buyers that request this type of transaction.
There are many options available when it comes to handling the payment schedule. Some potential buyers will be able to pay for the business all at once but some buyers may request that a payment schedule be made available, with or without ‘earnout’ provisions. Without earnout provisions this will likely just be based on some time period, but with earnout provisions the payment will be based on the performance of the company. When the company reaches goals specified in the agreement, payments will become due. This method gives the buyer some reassurance and comfort that they will pay only when the company performs as expected.
How you structure your payments depends on the pool of potential buyers and their desires. You may consider contemplated the tax implications of the sale, and think about how you would be benefitted from either a structured payment schedule or the funding of a purchase.
Check out the personal income tax liabilities for Thailand here or call Interactive to discuss your needs with a qualified accountant.