Getting your group structure right for disposal

 It is well recognised that grooming or preparing your company for sale is of crucial importance.  This increases the likelihood of a successful outcome from any disposal process.  One aspect worth considering relates to situations where there are a group of companies involved.  This could involve a formal legal group structure or a broader grouping of companies related through common shareholders.

The key in this area is to consider how a potential purchaser will perceive the group structure.  They will be keen to understand the relationships between group companies from a trading as well as an ownership point of view.  In particular, they will focus on any aspect which could create complications either in buying the group (or part of it) or in the trading relationships after acquisition.

Minority shareholdings can potentially create issues.  It is important to agree the proposed disposal process and what is acceptable for a deal to be done with all shareholders including any minorities.  If a Shareholders’ Agreement is in place this should address how any disposal would affect minority shareholders.  If not, then agreement should be reached before the disposal process commences rather than running the risk of disrupting any negotiations with a potential purchaser by subsequently having to reach agreement with minority shareholders.  

This is especially so where the minority shareholder exists in a subsidiary of the legal group or in one of the companies in a grouping with common ownership.  Such a minority shareholder would need to agree the value attached to their shareholding in the light of the overall deal being agreed for the group.

The trading relationships between group companies also need to be considered.  A potential purchaser needs to understand these and will want to ensure that any potential issues after an acquisition by them will be minimal.  In this respect, formal agreements should be put in place (if they do not already exist) to give clarity on how trading, shared services and/or management services are provided and on what terms.  It is also possible that the new owner will want to alter these arrangements and it is important to understand what flexibility there is from the vendor’s point of view.

The key aspect, as always, is to fully plan for the disposal process and ensure that all possible issues from a potential purchaser’s point of view have been considered and addressed prior to commencement of any disposal discussions.

For more information on this article, or to discuss your structuring options, contact Steven Lindsay on 0161 245 1000 or email slindsay@clbcoopers.co.uk