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Selling an Optical Business

The experience level of the Purchaser matters. Without the right guidance, dealing with both ends of the market carries very real risk.

Whilst first time buyers normally start with the best of intentions, naivety can be an issue. All too often, as the gravity of a proposed purchase and the financial and lease liabilities becomes clearer, inexperienced buyers get cold feet.

A sale that has fallen through in this way is a real headache, resulting in many wasted months, expenditure of significant emotional energy and a hefty legal bill - with nothing to show for it.

At the other end of the spectrum, knowledge is power. Talking to a party highly experienced in business transfer, without the right specialist advice and information on your side, immediately puts you as the seller at a major disadvantage.

Serial buyers utilise carefully crafted pitches designed to appeal to you both on an emotional level and with clever presentation of their financial offer to get you quickly hooked - often without a proper understanding of the full implications.

Case Studies and testimonials offered to support a serial buyer's credential are seldom representative.

This means that there is a very real danger of buying into the merits of a franchise or joint venture offer, on the basis of a historic and unrepresentative case study.

Joint ventures and franchises, like any other businesses naturally evolve over time and there is a fairly predictable pattern.

In order to attract early adopters, franchisors and parent joint venture companies initially have to offer generous terms and a very personal level of service and attention. These early pilot sites are then used as testimonials to sell the concept to more franchisees/partners.

However as the Organisation Grows Two Things Normally Happen:

Set the Right Asking Price

Valuations from non-specialist accountants and generic business valuers are extremely hit and miss. They are theorists who do not have access to sufficient real market data.

We frequently see valuation methodologies from other sectors erroneously applied to optical practices. Rely on their valuation or that of an interested party and you could seriously undersell your business, significantly overprice and you will scare people away.

The market for practice sales is like any market, it goes up and down in relation to supply and demand, availability of finance, confidence within the sector and buoyancy in national and global economic factors.

At Myers La Roche we have access to real, live market data from deals recently completed, deals agreed and with solicitors and deals with ongoing negotiations close to agreement.

Based on this data we are able to advise you on whether to expect to achieve the technical value or a premium value based on the market at the point you wish to sell.

Competition Within Confidential Bounds

From a commercial perspective, it is never the best idea to talk exclusively to a single party. Without the potential for competition your negotiating position with a buyer is infinitely weaker.

We can help create a competitive market place for you to explore all of the available options. To achieve a premium price and terms it is essential to generate a competitive marketplace for your business, a marketplace created within careful confidential parameters.

Did you know, for example, that a purchaser planning to work within the business themselves is likely to be prepared to offer more than a multiple?

Even if you are really tempted to sell to a multiple on some sort of staged basis due to their perceived ‘slick process’, having a higher price from another party will give you much better leverage in your negotiations with your preferred bidder.

However very often when competition is introduced, a party you were not aware of can be found who is prepared to offer both better terms and a better cultural fit. The timing of when you offer your practice to additional parties is also crucial. Market momentum is frequently an important factor.

The Devil is in the Detail

So what happens if you have been approached by a party and they have agreed a price for your practice, based on a genuinely credible technical valuation, including one done by Myers La Roche? Why do you still need help?

Practice sales are not straightforward. Practices are complex multi-dimensional beasts! In addition to the fixtures, fittings and equipment, you are also selling the ‘intangible goodwill’, you may or may not be selling your commercial contracts, including your CCG contract, and you may or may not be selling your bank account and contact lens contracts.

You may also be committing to post-sale consultancy work and other post-sale responsibilities and liabilities. Furthermore the contracts of your existing employees have to be handled extremely carefully under European legislation.

All the above are key areas that have to be agreed on very carefully and favourably. Failure to do this can mean that a high headline price is quickly denuded by factors such as ‘claw back’ clauses or other liabilities; you risk walking away with a lot less money, or carrying a level of risk for a number of years post-sale.

Once you are committed and a deal is with lawyers, it is very difficult to negotiate these important areas retrospectively in a cost effective way. Emotionally once committed to a sale, it can be psychologically difficult to walk away and can leave you with an expensive legal bill with nothing to show for it.

Avoid Falling into the False Economy Trap

It is natural that most buyers will encourage you to ‘save money’ by not using a specialist agent. The reality is that you might save a few thousand pounds on commission paid, but you may well lose tens of thousands of pounds on the deal we could negotiate for you.

Myers La Roche are in business because we add significant value to our clients; we deal with all of the major repeat buyers. We know their negotiation tactics, what they are ultimately prepared to pay and where they will not yield.

We also know the strengths and weaknesses of their propositions and can share this with you to enable you to make the right decisions from a position of full information.
When we are involved multiples know that they will have to pay full value for a deal and that there is a strong chance that we can identify an alternative, less high-profile party prepared to pay more than them.

When it comes to lower profile buyers and first time buyers, our two decades of experience have allowed us to develop systems that establish means, credibility and get the deal set up correctly to minimise the chance of it falling through.

We also operate a client protection register to highlight parties who historically have been unreliable.

To talk through your options for the best way to sell your business, please call Dominic Watson on 0161 929 8389 or email dwatson@myerslaroche.co.uk

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Case Study: The benefits of exit planning to achieve an optimised sale within the optical sector

Following a structured exit plan designed via our Exit 360 PathfinderTM service we have just completed on the sale of an optical practice in West Yorkshire. The transaction involved a separation of assets comprising a domiciliary business, traditional practice and separate freehold buildings of mixed usage.

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