Extract from CMR Ops Manual
CMR COMPANY SALES PROGRAMME
The company sales market is vast – the primary exit route for a company owner is to sell
their business. In the SME sector the predominant reason for owners to sell is their desire
to retire – many will have looked upon the value of their business as being their pension
fund. As the post-war baby boomers are now coming up to retirement age, the market for
company sales will become brisk over the coming years.
This represents a major opportunity for CMR because our structure and expertise is
particularly suited to the company sales process. Many of our competitors are singlethread brokers who only really have the capability to advertise their client’s businesses
for sale. CMR has the ability to be far more proactive and to include some important
features that ordinary brokers cannot hope to match.
CMR’s competitive advantage comes from two main factors:
1) Because of the size and breadth of our executive base we have the ability to
accurately target and approach potential buyers. We also have the specific
industry experience to know how to structure and negotiate the deals.
2) We have the CMR MBI Programme – management buy-in’s are an ideal way for
a retiring owner to pass their business onto experienced executives, for probably
an enhanced value over an outright sale. MBI sales channels are generally not
available to ordinary company sales brokers.
In this section of the CMR Operations Manual we concentrate on the conventional
company sales process – a separate section follows on the CMR MBI Programme.
Generally both processes (conventional and MBI) should be employed for clients to give
the best chance of securing a successful sale.
COMPANY SALES MARKETING CONSIDERATIONS
The following considerations apply for clients in the sales process, and these form part of
our marketing approach to them.
Maximise the sales value of your business
The value of a business is what someone is willing to pay for it. However,
different people have different perspectives with different purposes and
motivations. A buyer who has a strategic purpose who believes he can derive
more future benefit from buying the business, is a buyer who will probably be
prepared to pay more than someone else. So the selling strategies adopted are of
vital importance in terms of maximising sales values.
Buyer perception is also very important - if it looks good, appears reliable, has
good future potential and fits what the buyer is looking for, then the probability of
a sale increases, as does the price the buyer will pay. It follows that presenting the
business in an attractive way, whilst removing any barriers to a sale, is key to
achieving maximum sales value.
When it comes to the actual price negotiation, the buyer will be influenced by the
level of current profitability and whether this is on an upward path. If it is, the
sales price achieved will probably be higher. If enough time exists before selling,
it is often possible to use cost reduction and profit improvement techniques - a
specific CMR service - to increase the apparent profitability and therefore the
eventual sales price.
Another important influence on the sales value achieved will be the level of buyer
competition. Although only one purchaser is required, the ideal situation is where
several buyers fight to win.
A further method of enhancing the eventual sales price achieved is to consider
selling the business to external executives who want to take over the running of
the business themselves. This is called a MBI - management buy-in. Although
these are usually structured on a part-payment now with earn-out payments over a
defined period or a progressive sale, the eventual price paid can be considerably
higher. Sometimes a MBI purchase will be combined with existing employees of
the company, in which case it is called a BIMBO (Buy-In Management & BuyOut) and this is generally a preferred structure for external funders.
In summary, many significant factors influence the maximising of the eventual
sales value achieved. All need to be considered as an integral part of the sales
process. CMR will guide sellers through this maze of options to achieve the best
final result.
Sell your business quickly
Everyone would like to sell their business at the price sought and without delay.
Sadly that does not always happen. Many people suffer a protracted selling
process or even worse - will not sell at all.
An adverse effect of any protracted process is that the owner takes his eye off the
day-to-day running of the business with a resultant decline in the performance and
therefore the value of the company.
This tends to happen when sellers have not properly prepared the business or the
presentation before putting it on the market. It also happens when people
approach the selling process in a half-hearted manner, when a clear sales strategy
has neither been agreed upon or actioned.
Many sellers go to a company sales agency that merely lists their business
together with many others, in the hope that a suitable buyer will simply appear.
This is a sloppy way of trying to sell a business. This method will leave sellers
disappointed and their businesses under-valued. This is not the CMR approach!
CMR makes sure that the business is properly prepared and presented. Then we
specifically and strategically target those buyer groups that are likely to be
interested in the business at the price sought. Those potential buyers will be
approached on a strictly confidential basis within the same timeframe - our
objective is to encourage as many serious buyers as possible to compete in the
race to win the company.
We therefore avoid the prevarication and extended negotiation process that often
occurs when there is only one potential buyer involved. We have found that this
is the best way to achieve the price sought and complete the sale in the shortest
possible time.
Get expert advice to make right decisions
Selling your business is not something most people do very often! In fact, many
business owners will only do it once in their lives. This complex process has
many traps and pitfalls and most owners will lack any prior experience upon
which they can rely. It is vital to do it the right way - CMR will help you through.
It makes sense to take advice from experts who have much experience of selling
companies. CMR will guide you through the process, discuss with you the pros
and cons of the decisions you will need to make and give you their opinions. This
is done in a highly supportive way, but of course, at the end of the day - what you
do with your business is your decision - CMR will help you come to the right
decisions.
The decisions before you will be many and varied, including: What type of sale
are you looking for - outright? phased? for cash? or other consideration? ... with
your continuing involvement? or without? What sort of buyers would you like trade, investors, MBI executives, involving existing staff (MBO or BIMBO)?
What price should it be marketed for? What timescales would you like? The list is
endless - CMR will guide you through.
Adopt correct selling strategies
Selling your company is not something that just happens - it needs to be carefully
planned and executed.
Your objective and ours is, of course, to sell your business quickly and for the
best price - hopefully at the asking price or more.
In order to achieve this target, the entire process must be carefully thought
through. We will help you to make decisions on how to structure and present the
buying opportunity that the sale of your company represents. The perception of
your business in the eyes of potential buyers has to be absolutely right. The
selection and targeting of buyers is also extremely important - we know that some
buyers will be prepared to pay more than others will.
There may be some aspects of the company that could represent a turn-off and it
is vital that these are dealt with - either eliminated or explained, before buyers are
approached. CMR can help with this process.
There will almost certainly be things that can be done to enhance the perceived
attractiveness of your company to potential buyers. We will ensure that these are
put in place before marketing the company.
Most buyers (of the size of company that we are interested in selling) will have to
go to external funders – banks or equity funders – to support the transaction and it
is important that the business and purchasing team are attractive to them as well.
The handling of prospective buyers is another major aspect to consider. We may
suggest that initial discussions are conducted by an intermediary - CMR can
perform this function. This will protect the seller's identity and allow the presifting of potential purchasers before the first meeting with you.
All these issues and many more will be the subject of extensive discussions
between you and CMR - we will advise and recommend, but the ultimate
decisions are yours.
Setting sales price at the right level
The correct price/value of a business is what someone will pay for it. This is a
massive over-simplification because, to a large extent, the price/value will be
based on the buyer's perception of the company plus the buyer's own situation.
Some buyers will be prepared to pay more and of course if there is buyer
competition, this will usually increase the price paid.
The setting of the asking price is therefore more of an art than a science - there is
no magical formula that can be applied to all situations – and generally there will
be a range of prices for different types of purchaser (BIMBO, Trade Purchase,
Venture Capital etc) and according to strategic fit.
CMR approaches the challenge by working with the owner to discuss the various
issues involved. A non-exhaustive list of items to consider is: past profit
performance, consistency - rising or falling, marketable assets, speed of sale
sought, any barriers/ skeletons-in-the-cupboard, market situation, recent sale of
similar companies, predatory acquirers, strategic fits, likely buyer motivations.
CMR's experts will suggest a price (or range of prices for different types of
potential purchasers) having discussed the rationale with the owner. However
normally potential purchasers are asked to present a bid without a formal asking
price being mentioned. If there is no specific rush to sell the business, the decision
will normally be taken to price the business for the ideal buyer - i.e. the buyer
who will see the greatest value because of their own circumstances. We also take
negotiating margins into account - many buyers will only feel happy if they have
negotiated a reduction in price!
As we start to market the business and have discussions with potential buyers, we
will start to refine the target price - perhaps the price is a little too high or we find
unexpected strategic fits with potential purchasers? Note that it is normally easier
to go down than up although both do happen!
At the end of the day decisions on pricing and the deals to make are yours, the
vendors. CMR will guide you, but it is of course your ultimate decision.
Target all potential buyers
The question of how and when to target potential buyers is important. Key to the
form of approach is the issue of confidentiality. First approaches are generally
made on a no names basis and confidentiality or non-disclosure agreements
signed before the company for sale is identified.
It is always a fine decision, and one that will be taken in consultation with the
owner.
On one hand, there is a big advantage in approaching prospective buyers within
the same timeframe as this will increase the chances of stimulating competitive
bidding. However, in some circumstances there will be several different types of
buyer group, one or more of which could be more likely to pay a higher price
because the business is more valuable to them. Obviously it would be better to
give those buyers the chance to buy first, rather than risk having to accept a lower
price because of timing effects. Additionally there is always the risk of adverse
reaction when a company is aware that a competitor is for sale and it may be
preferable to delay advising certain less honourable potential targets.
In terms of how to target buyers, clearly the first stage has to be the identification
of potential buyers and their classification into their appropriate buyer groups trade, institutional, investor, MBI, MBO or BIMBO. CMR has a wide range of
executive skills in every industry and will be able to supplement the owner's
knowledge in developing the target list of prospects.
The timing is vital. Having decided which particular buyer group is going to be
targeted first, the next stage is to make the initial approach and to do it in a way
that is most likely to develop bidding competition. This always has the effect of
increasing the eventual sales price.
Quite uniquely, CMR has its own bank of private investors and senior executives
who could be interested in a MBI (management buy-in) purchase of the business.
Generally MBI purchasers will pay a higher eventual price, although part of the
consideration will usually be paid downstream, as negotiated with the owner. It is
a useful additional source of potential buyers, especially for retirement sales
where the existing owner may be prepared to continue in the business for a time,
and the incoming executives/ buyers will appreciate a handover period.
Market the business professionally
Marketing a business for sale is similar to the marketing of any other 'product'.
The process in both cases is to market the business/product in a way that presents
potential buyers with an attractive proposition at a price they are prepared to pay.
We want the buyer to believe that by acquiring the company they will achieve
their objectives and of course, make more money/profits as a result.
Different buyer groups will often have different motivations. These must be
reflected in the marketing material produced. Sometimes therefore the marketing
packages produced will differ, reflecting the specific buyer groups.
Traditionally a 'Business Plan' will be produced, which will include all the details
of the company needed by potential buyers to evaluate whether to take their
interest further.
Normally we will approach targeted buyers directly, but sometimes there may be
situations where more general advertising is appropriate. The need for
confidentiality, which will vary from one company to another, will determine the
desired marketing route.
In all cases, CMR's experts will advise and discuss the key options with the
business owner.
Negotiate & complete
The final stage is to negotiate with all the buyers who have indicated an interest.
If the process runs true to form, there will be some serious potential buyers and
some that fall into the tyre-kicking category. Obviously we only want to spend
time with the former but the apparent tyre kickers can not all be discounted as
they can end up as serious purchasers. To a large extent the degree of negotiation
strength will depend on whether there is a competitive buyer situation and our
ability to put over the strategic fit between two businesses – very often the people
at lower levels in a group are unaware of the benefits to their organization outside
their own division!
A guiding principle in negotiation is to try to look at the situation from the other
guy's viewpoint - in this way, it is far more likely to hammer-out a deal that stands
a good chance of being accepted.
Realism is essential in coming to deals, and a benefit of having CMR's experts
onside is the sum total of our rational views, opinions and specialised experience.
We can also act as the intermediary, which means that the owner's position
remains unsullied by the rough and tumble of negotiation and they can intervene
as appropriate. The final decision is, of course, always entirely down to the
owner.
When an outline deal has been reached, it is crucial that the owner seeks
independent professional advice, especially on legal and taxation matters.
CMR INTERNAL PROCEDURES
The CMR Company Sales Programme can be activated both by CMR Regions and the
M&A Special Business Group – for control and management purposes the M&A Group
will have the ultimate authority to supervise CMR’s operations in this area.
So, all regional CMR company sales activities will be managed by CMR Regional
Directors, working through their Divisional Director, and in conjunction with the CMR
M&A Director.
We need to be aware that some company sales activities could fall within the provisions
of the Markets and Financial Services Act, and so legal procedures must be followed
implicitly.
CMR COMPANY SALES FEE STRUCTURE
The principles enshrined in all of CMR’s business concepts and ethics will be applied
also to our company sales operations.
This means that as a principle we will ally our interests with those of our clients and only
charge them as we create value. This means that we will often not charge a fixed upfront
fee for brokering a deal, but we will charge a percentage success fee, usually with a
minimum level set and with progress payments made as certain stages are reached.
However, it would be permissible to offer the client a reduced percentage success fee in
return for a fixed upfront fee, if the client wishes to adopt that option – but it must be the
client’s option, understanding that any upfront payment is not refundable.
As a generality, we will charge the client fees for work done/ deliverables in bringing the
project to the point where it can be offered/ presented to buyers or investors, and also for
undertaking any additional work not directly related to the actual introduction of
buyers/investors.
As a matter of policy, we will not engage in any due diligence work – that must be
entrusted by the client and other parties to their own independent professional advisers.
The CMR fee structure is designed to preclude a client from reclaiming money paid to
CMR, on the basis we did not achieve a successful outcome, despite having charged
upfront for doing so. For this same reason, we must always make sure the client
understands that we cannot guarantee that a successful outcome will be achieved.
CMR's STANDARD COMPANY SALE ASSISTANCE AGREEMENT
For the attention of __________________________________________________
date
Dear Sirs,
Company Sale Assistance Agreement (CSAA)
We will be pleased to provide assistance in meeting your business objectives and those of any
associated companies, through:
Introducing buyers, merger partners, or acquisition prospects or others (all referred to as “Other Parties”), or the
formation of a group of companies which will include all or part of your business.
You confirm that you will not, either directly or indirectly, make any arrangement with any
“Other Party” introduced by CMR without our written permission. Offers from or to those “Other
Parties” during the currency of our agreement will not be unreasonably refused by you. If
agreement with those ‘Other Parties’ introduced by CMR has not been completed within
twelve months from this date; we shall make available to you a list of our introduced contacts
to attach to this Agreement and to whom these introductory terms continue to apply.
Fee Agreement
CMR’s fee structure is in stages to reflect the work undertaken and the successes achieved. Whilst
every effort will be made, CMR obviously cannot guarantee that a successful outcome will be
achieved. Out-of-pocket expenses as agreed with the client will be reimbursed promptly.
[A retainer fee of £x is payable upon the signing of this agreement.][Retainer normally only
charged in exceptional circumstances]
A briefing preparation fee (as defined below ) at £x (rate to be agreed) payable 50% upon
agreement, and 50% on completion of stage. This fee to be netted-off from the eventual success
fee.
A further fee may be agreed if an exceptional amount of work or research is required for targeting
potential buyers, otherwise that activity is included in the success fee.
Normal general advice during discussions with potential buyers is covered by the success fee, but
detailed and legal negotiations are not. The client is strongly advised to take independent
professional advice, including tax, legal and financial, for this stage. If CMR's presence (as an
observer) is requested, a separate fee may be agreed.





Work covered by Briefing Preparation Fee
review of existing information and data and initial review meetings
collection of further data on your historic data, business field, competitors, market trends
assistance in producing Business Plan & Strategy Plan to optimize 5-year projections
suggestions of plan strategy change and/or Company re-organization
preparation of a draft Sales Prospectus Executive Summary
Success Fee
1. For purchases, mergers, joint ventures or actual sale arranged:

a fee equal to 5% + VAT of the actual transaction value agreed, with a minimum of £7,500,
plus
The 5% shall apply to the first £500,000 of the agreed transaction price, thereafter the fee percentage shall be
4% of next £500,000, plus 3% of next £1 000,000, plus 2% of all further amounts.

a like fee based on the notional value on the open market as assessed by an independent
firm of Chartered Accountants to be nominated by The Institute of Chartered Accountants
in England and Wales, if a negotiation other than a straightforward purchase or sale is
completed. Cost of this assessment is for your account.
Such payment will be made on drawdown or within seven days of receipt by you of these funds, or
legal completion of the agreement.
If a group of companies including your business is formed through the actions of CMR, you will not
unreasonably refuse to accept the same terms negotiated by CMR with the ‘Other Parties’ involved, at the
time of group formation.
If you decide to retain principal assets, that are required for the operation of the business (for the
avoidance of confusion, including trade debtors) in a company sale CMR may charge a fee
corresponding to the relevant success fee percentage that would have applied if they were not
being retained.
If it proves necessary to provide additional consulting services to prepare the business for sale, then CMR reserves the right to charge at a rate of
£700 per diem, plus out of pocket expenses, for such consulting services, subject to prior approval in writing.
Abort Fee
In the event a merger, joint venture or actual sale with target Companies introduced by CMR is aborted by
the client, subsequent to Heads of Agreement being signed, CMR shall be entitled to an abort fee of 50% of
the success fee that would otherwise have been payable, based on the agreed Heads of Terms, and will
invoice upon irrevocable negotiation breakdown.
Agreement commencement date ____________, for an initial term of 12 months
This agreement shall be subject to the laws of England.
Agreed by and on behalf of Cavendish Management Resources Limited, whose registered office is
31 Harley Street, London W1G 9QS
_______________________________________________ Date ____________
CMR responsible:
Agreed by and on behalf of __________________________________________, whose registered
office is _________________________ _________________________________________________.
_______________________________________________
Client Director:
Address
Company Number
Date ____________
Scroll down for CMR MBI Programme ………………………
CMR MBI PROGRAMME
SUMMARY
In the past one of the main elements of CMR's business model has been the use of
funding as a door-opener to potential business clients - this will continue but is now
supplemented by the CMR MBI Programme.
A major challenge for private businesses is the retirement sale. Children no longer wish
to take over family firms and with the changing economy trade sales are no longer so
easy or rewarding. In parallel, numbers of skilled executives who have enjoyed early
retirement are looking to control their own destiny and run their own business. The
challenge is matching candidates with opportunities.
The MBI Programme
The CMR MBI Programme starts with an approach being made by CMR Centre to
businesses that have put themselves up for sale – details of suitable companies (above £1
million sales) are obtained from company sales brokers/websites to which CMR
subscribes. The programme will also accept MBI propositions directly from brokers and
companies themselves.
The approach introduces CMR to the company seller together with the concept of a
possible sale through the MBI route. Suitable businesses would be introduced to
potential MBI buyers comprising CMR MBI investors & executives and others on the
MBI register or known to members who could possibly be interested in buying the
business.
The reality of life for many company sellers is that they will not readily find suitable
buyers, and those that do, because of sellers’ normal exaggerated ideas of the value of
their business, will rarely be offered the full price they seek. As a result, many of those
sellers will be interested to at least explore an approach that could give them an
alternative exit route. One attraction of the MBI route can be that in accepting a deferred
element of payment, which helps the purchasers’ funding, the vendor can receive more
than through a conventional trade sale
Just as we cannot guarantee that funding will be achieved, we will not be guaranteeing
that actual buyers will be forthcoming – only that their business if suitable, will be
confidentially introduced to potential MBI buyers.
Associated opportunities
In order to be introduced to our MBI buyers (and obtain maximum value for the
business), the company must be ‘investment ready’ – which means the vendor must have
presented the opportunity reasonably professionally and there should not be any
significant unaddressed problems/ barriers for an incoming buyer. This review and representation may also generate some fee-earning opportunities for us in helping the
business to be more saleable, not necessarily just through CMR.
Many of those companies that are up for sale will have financial or trading problems, and
some will have been put up for sale by relatives when the owner has fallen ill or died.
There could also be opportunities for ‘improving’ the business before introducing to
prospective purchasers. Our initial meeting with the ‘client’ could throw-up those
opportunities for us - providing interim management or other specialised help to the
company. Those companies that are considered to be suitable for the CMR MBI
Programme will be introduced to CMR’s MBI investor & executive base. It may also be
possible that CMR’s M&A Division can help them find a conventional buyer.
The MBI Register
Part of this MBI programme includes increasing the reservoir of potential MBI
purchasers and executives, and for this we have opened a new form of CMR membership
- that of CMR MBI Membership. All existing CMR members and investors will be
automatically included (with opt-out capability). CMR MBI Membership is free and will
also be offered widely to executives generally and others interested in such business
propositions – it is hoped that eventually we will have many thousands of MBI members.
CMR MBI members will be informed of new business purchase opportunities meeting
their preferences and have been 'vetted' through CMR's regional operations. As with
normal CMR investors for funding propositions, there will also be a regular email
newsletter listing all MBI opportunities received since the previous newsletter. However
to take an opportunity further beyond this stage, free members will have to
convert/upgrade to CMR Full Membership.
Included in the CMR Programme is training for existing CMR members, providing
guidelines on how to handle the initial meeting with company sellers. There is also a
paid-for training course for executives/ business people wishing to learn more about how
to arrange and successfully handle a company purchase/MBI.
As part of the programme, CMR provides a syndication facility enabling CMR MBI
members to join together in making a purchase if they wish.
Promoting the MBI Programme and fee structure
The CMR Website incorporates the new facility - we have effectively replicated and
slightly modified the CMR FundEX & investor website sections to deal separately with
this company purchase/MBI programme.
Internally the MBI system will involve passing to CMR Regions those client meeting
opportunities that have been generated through CMR Centre. Such generation will only
occur as requested by each CMR Region (to ensure that all opportunities are actually
followed-up). The normal 10% introductory commission will accrue to CMR Centre to
help pay for the system’s costs. Introductions into the system from other sources will
also attract that commission payment.
Normal CMR fee sharing arrangements for Company Purchase/MBI projects apply with
the CMR Region/members who are handling the project earning 70% of the fees
received, with Divisional/ Regional management taking 5%. CMR Centre will receive its
usual 15% and the introducers 10% fee will be handled as noted above. Fees charged for
successful company purchase/MBI projects by CMR are the same as for funding:
a) 5% on the first £500,000 initial purchase price in cash/ consideration, reducing
thereafter to 4% on the next £500,000, to 3% on the next £1,000,000, thereafter
down to 2%, plus
b) Where the initial purchase payment does not represent the full eventual
consideration, then CMR shall be entitled to 5% (as reduced in a. above) of the
issued share capital reduced by the proportion the amount paid initially has to the
total consideration. There will be an addendum to the shareholders agreement to
protect CMR’s interests. Equity will be subject to the same fee splits as above.
Fees charged to the client for other work undertaken will be subject to standard CMR fee
sharing arrangements.
DRAFT LETTER TO COMPANY SELLERS (can be modified)
Dear Co Seller,
We noticed that your business may be available for purchase - we might have an interest.
CMR is an organisation comprising investors and senior executives with a particular
interest in investing in or purchasing suitable companies. You can review CMR's overall
operations at www.cmrworld.com
Because of our many investors & executives, the interest from CMR could be in the form
of either a complete upfront purchase for cash or through a management buy-in
arrangement.
We would be interested in discussing this further with you - please let me know if you are
too - we will arrange for one of our executives to call for a preliminary and confidential
discussion with you. There will be of course no obligation to proceed further.
Kind regards,
Mike Downey FCCA
Managing Director
DRAFT LETTER TO COMPANY SALES BROKERS (can be modified)
We are potentially interested in this company sale proposition. If acceptable to
you, one of our regional executives will shortly make contact with you to discuss
in more detail. They will sign your confidentiality agreement directly with you.
Our interest in this proposition is in respect of the CMR MBI Programme – details
and an explanation of this are shown below.
Please advise by return email that this business is still available for sale.
Regards,
MBI Company Purchase Division
Cavendish Management Resources
Email: [email protected]
CMR MBI PROGRAMME
Management buy-in
Why we are interested in this proposition
CMR was established in 1984 and is now the leading business funding and
management support organisation for SMEs in the UK and Ireland. See
www.cmrworld.com for details. Over the years we have arranged the investment of
many millions of pounds into businesses.
CMR has a substantial number of investors and executives who are interested in buying
or investing into businesses. That interest can be for an outright purchase or a
MBI/BIMBO purchase including a negotiated element of earn-out, which can often result
in a higher eventual price for the seller.
CMR is now greatly expanding its MBI operations – MBI’s can be an excellent career
move for senior director-level executives who desire to run their own business, and have
the funds to back that ambition. As part of CMR's MBI Programme we provide sources
of finance plus syndication facilities and support for our executive/ investor members.
The Programme notifies our executives/ investors when potentially suitable MBI/BIMBO
opportunities are received following a preliminary pre-vetting of propositions presented.
The CMR MBI process involves one of our executives (we have 450 senior director-level
executives in all parts of the UK and Ireland) visiting the company to discuss going the
MBI-sale route. If it is appropriate and the owner agrees, we will prepare a brief
summary for introduction of the proposition to CMR's MBI investors/executives - this is
done in confidence and at this stage will not identify the selling company. By
investigating this MBI route the company is not precluded from seeking buyers in other
directions – effectively the range of options available to the seller is expanded, and the
chances of securing a satisfactory outcome is improved.
If the summarised proposition generates interest, the CMR executives/ investors
expressing that interest will be put directly in touch with the company (through
yourselves if appropriate). At this time we would recommend that full confidentiality
agreements should be personally signed by those involved. All parties are responsible
for taking their own independent professional advice and due diligence. CMR takes no
responsibility in that respect.
The CMR MBI Programme is an alternative channel for sellers, and will be especially
useful for retirement sales. There are very many senior executives for whom the MBI
buying of a company makes excellent sense for developing their future career and
financial independence.
If there are any aspects of the programme you would like to discuss, please don't
hesitate to make contact with me. One of our executives will be in touch shortly to
discuss this particular proposition with you.
Kind regards,
Mike Downey FCCA
Managing Director
CMR MBI OPERATING PROCEDURES
1) CMR Centre set-up meeting with client as above. This passed to the relevant CMR
Region or CMR M&A Group as appropriate.
2) Visit from CMR Regional Executive trained in the CMR MBI system if client is selfselling. If client is listed through a Company Sales Broker, the meeting will be
conducted only by a CMR member authorised by CMR’s M&A Division who will make
arrangements through the relevant broker (CMR Region will be kept advised).
3) CMR Exec explains outline of programme to client:
a) Initial (free) assessment - i.e. this visit
b) Explain how the CMR MBI system works - also how CMR’s M&A Division
can possibly help.
b) The need for a quality business summary/ prospectus - if one does not exist
then offer to arrange (charged for). This can also be used by the client for
discussions with other prospective purchasers.
c) Review of all issues likely to represent a barrier to sale or which could turn-off
prospective purchasers. Suggestions for rectification.
d) Discuss the advantages of having CMR’s M&A Division handle the company
sale. Refer to CMR M&A Division if appropriate.
e) If not going CMR M&A route, assess suitability for CMR MBI route.
4) CMR Exec contacts CMR M&A Division or CMR Regional Director if client a
prospect for CMR Company Sale Programme.
5) CMR Exec lists client’s business on CMR MBI database, if not being passed to CMR
M&A Division, and if client has signed our standard terms & conditions. All CMR MBI
members will then be informed of the new MBI opportunity, and those interested will
make contact with the seller through the handling CMR member.
6) CMR Exec assesses possible further business opportunities with client. As stated
above, the visit should be regarded as a door-opener to discuss other routes forward for
the company and the (probably) many other ways CMR can help the client.
CMR Terms of Trade - MBI Projects:
i)
To companies directly handled by CMR (i.e. not through a broker)
a) 5% on the first £500,000 initial purchase price in cash/ consideration, reducing
thereafter to 4% on the next £500,000, to 3% on the next £1,000,000, thereafter
down to 2%, plus
b) Where the initial purchase payment does not represent the full eventual
consideration, then CMR shall be entitled to 5% (as reduced in a. above) of the
issued share capital reduced by the proportion the amount paid initially has to the
total consideration. There will be an addendum to the shareholders agreement to
protect CMR’s interests.
ii)
To companies introduced through a broker
a) Nil% unless negotiated with broker.
iii)
To Company buyers/MBI’ers
a) A fee of 0.5% of the total purchase price is payable to CMR
CMR fee/equity standard sharing - 10% to introducer, 70% to those directly involved in
preparing company for presentation to MBIs (not the MBI team), 5% to Div/Reg
Directors, 15% to CMR.
CMR MBI EXECUTIVE/INVESTOR DATABASE
1) Open to all executives & investors without charge.
2) Must be Full or RMC Associate members of CMR to take any opportunity forward.
3) All 'vetted' opportunities are sent to MBI database in same way as for regular funding
projects:
a) Email notified based on preferences matched
b) By regular email newsletter
c) On website to be searched (by public) – can include video (if confidentiality
allows).
4) MBI members may bid for business as either individuals or as teams, possibly in
competition with other CMR MBI individuals/teams. (NB: CMR’s client is always the
selling company, not the MBI team).
5) All MBI members will have signed CDA and agreed to CMR's terms.
6) Successful MBI team will ensure that CMR has 5% share option with shareholders
agreement. They will also ensure that the seller pays CMR its success fees.
7) CMR provides optional (chargeable) training courses for MBI members to help the
process of successfully handling the MBI and subsequent business issues.
ARRANGEMENTS FOR MBI DATABASE MEMBERS
CMR provides a facility for executives and investors who are interested in possibly being
involved in a MBI purchase and running a business.
MBI members register (free) on the CMR MBI Database, and are email notified of all
'vetted' business purchase opportunities that meet their stated preferences. They will also
receive regular email newsletters listing all new 'vetted' opportunities received by CMR.
The CMR website can also be reviewed at anytime, where all current MBI opportunities
are listed – company identification is not included. This service is free of charge. Some
company sale propositions will be considered (by the client) to be so sensitive/
confidential that only MBI members who are already also CMR full members will be
notified (through the password-protected CMR Intranet).
If an opportunity is of interest the CMR MBI member can register that interest online
with the CMR executive who is managing that project (this goes via cmradmin to check
membership status – only enquiries from CMR full members will be passed-on). Further
information will be passed-on as appropriate, including details of other CMR MBI
members who are interested. The regional 'vetting' is not a due diligence process, but
merely intended to sort the business wheat from the chaff. Bidding members are fully
responsible for taking due diligence and professional advice as appropriate and as they
deem necessary.
CMR MBI members are now in a free enterprise zone - it is their decision whether to
make a bid for the business, and whether that is done individually or as part of a
syndicate with other CMR members. The situation could be competitive either with other
CMR individuals or syndicates, or of course with external potential buyers.
Part of the approach made by CMR to the business seller, is that the CMR-introduced
deal could be on a part cash/ part earn-out basis, although of course this is subject to
negotiation between the parties.
CMR will give whatever support it can, but obviously the ultimate and legal
responsibility for the negotiations and final agreement rests entirely with the buyer and
seller. CMR provides a training and mentoring programme to help its members optimise
their chances for achieving a successful outcome.
Whilst the initial part of the CMR MBI Programme is free of charge, there is a success
fee when a deal is done. This is in two parts:
a) 5% on the first £500,000 initial purchase price in cash/ consideration, reducing
thereafter to 4% on the next £500,000, to 3% on the next £1,000,000, thereafter down
to 2%, plus
b) Where the initial purchase payment does not represent the full eventual
consideration, then CMR shall be entitled to 5% (as reduced in a. above) of the issued
share capital reduced by the proportion the amount paid initially has to the total
consideration. There will be an addendum to the shareholders agreement to protect
CMR’s interests.
CMR MBI MEMBERSHIP – BRIEFING FOR EXTERNAL CANDIDATES
CMR MBI Membership is open to all senior executives and others who may have an interest in owning and
running an existing, established business purchased through the MBI (Management Buy In) route. CMR
MBI membership is free, and provides the following facilities:
1) Notification by email of all MBI opportunities that have been ‘vetted’ by CMR’s executives.
CMR MBI members can also search the CMR MBI website for all current MBI opportunities.
NB: ‘Vetting’ by CMR executives merely means that the business has been looked at and
considered possibly suitable for a MBI purchase – in no way is it an endorsement of that business,
nor has any due diligence been undertaken – that is the sole responsibility of those making an offer
for the business.
2) Syndication Service: CMR MBI members can indicate to CMR that they are interested in a
particular MBI opportunity and are interested in perhaps linking with other CMR MBI members.
CMR will pass that onto those other CMR MBI members who have expressed the same interest.
3) Financing Options: CMR will be able to suggest sources of finance should the MBI purchasers or
business consider this desirable. However, CMR cannot guarantee that sources of finance will be
forthcoming, and it is the ultimate responsibility of those concerned to make their own
arrangements and take their own independent professional advice.
4) Ongoing Business Support: CMR’s core business is the provision of senior management support
and specialist business resources – see CMR Website at www.cmrworld.com for full details.
Those resources are fully available to businesses purchased through the CMR MBI Programme.
5) Training Courses: There are many potential pitfalls and intricacies involved with a MBI purchase,
and those considering the MBI route for their future business and career development would be
well-advised to attend the special CMR MBI Training Course. This intensive one-day course
costs £350 + VAT, inclusive of meals and course materials.
Whilst CMR MBI membership is free, and members will be freely notified of all ‘vetted’ opportunities
received by CMR, Full CMR Executive Membership is required to take any opportunity forward beyond
the initial ‘I’m interested’ stage. Full CMR Membership gives complete access to all of CMR’s resources
and the entire CMR skills network – an invaluable facility for successfully running a MBI purchased
company. Free CMR MBI members can attend the MBI Training Course without upgrading to Full CMR
Membership.
To join as a free CMR MBI Member go to the CMR Website at www.cmrworld.com and click Join us –
MBI. If you prefer to join straightaway as a CMR Full Member, please click the ‘Join us – Executives’
button – all CMR Full Members are automatically registered as a MBI Member.
FURTHER NOTES FOR CMR EXECUTIVES HANDLING INITIAL MEETING:
Standard approaches are made by CMR to companies who have placed themselves up for
sale. No doubt most will be hoping a cash buyer comes ready to pay the price they ask
for. The reality is usually going to be different - they either won't attract a suitable buyer,
or if they do, the price offered is likely to be unacceptably below their asking price. As a
result there will be many such companies who will be interested in at least discussing an
alternative approach with CMR.
1) It is important to recognise that as with funding projects, we will not be able to
guarantee a successful outcome - we cannot guarantee anything, other than we will
introduce their prospective business sale (if it is suitable) to our investors/MBI group, and
if they meet our presentational standards. It will be entirely for the investors/MBI Group
to decide whether to take things further, and of course, whether to make a purchase/MBI
offer.
2) To extract maximum value, we should view the meetings with company sellers as an
opportunity to also explore other ways we might be able to help them. The reality of life
is that many companies that have put themselves up for sale will have problems, some
may be being put up for sale by the family of the deceased owner, and some will require
help in continuing to run the business when they don't find a suitable buyer, etc., etc.
There will be many opportunities for CMR to provide its expertise and resources to help
these companies.
3) Suggested structure for the initial meeting - this is a guide only - you should handle the
meeting in the way you feel most comfortable.
a) Probably best to start by giving a quick overview of CMR and its operations. Main
points to cover are:
i) Established 1984
ii) Operates throughout UK and Ireland with circa 450 senior executives and
many investors. Refer to the website for more details on our operations.
iii) All CMR executives are director level people and many are interested, in
conjunction with our investors, in becoming involved with buying into businesses
that they can then run successfully into the future.
b) Explain that the way CMR operates in this respect is to review the business and make
recommendations on any changes we think appropriate to the way the business is
presenting itself to potential buyers - we would not want to present the business to our
own investor/MBI's if there were important deficiencies. Such a review by CMR is freeof-charge/ subject to standard fee of say £500 (basis to be decided by CMR executive
handling – but a fee-charge is recommended if more time than just initial meeting needed
for review). In all cases if we are charging fees, the seller is our client (not the purchaser)
and our objective is to help the company in its approach to all potential buyers, not just
CMR's investors/MBIs.
Of course, if those recommendations we make involve further work being done (for
example, rewriting the sale prospectus), and the client is agreeable, there will be a fee
charged by CMR as agreed.
c) Explain the ‘conventional’ company sale programme provided by CMR’s M&A
Division and discuss whether the client would like to go that route. If they do, the M&A
Division should be contacted to progress with the client.
Advantages for client in having CMR M&A Division handle the company sale:
i) CMR has probably the largest network of contacts for finding suitable buyers
ii) CMR has many hundreds of senior executives and investors with experience in all industry
areas
iii) CMR has great experience in advising companies on how to approach the selling process and
how to value the business.
iv) CMR can help to present the business in the best way for attracting buyers.
v) CMR can access the widest range of selling options – from outright conventional sale,
management buy-in and buy-out, merger, to CMR’s own Progressive Company Sale Programme.
d) If a MBI sale route is considered suitable it will then be introduced to CMR's investors
and MBIs through the CMR website system. Interest from CMR MBI members will be
directed to the company via the handling CMR member for further discussion as
appropriate. CMR cannot guarantee that any investor/MBI interest will be generated, nor
of course that they will want to make an offer for the company. The company is
responsible for taking its own professional advice before finalising any arrangement.
e) Explain that many of CMR's executives and investors are interested in becoming
directly involved with running the business, and that any offer from them could either be
for a complete upfront purchase, or in the form of a percentage of the agreed price being
paid upfront, with the balance being paid from profits made over subsequent years. The
details of this are for discussion between the parties involved, but often this arrangement
will result in the owner being paid a better price than for a completely outright sale, if
that were possible. Obviously the owner/seller has complete discretion over whether to
accept or reject any offer made. In all cases the discussions are strictly confidential. We
should recommend the seller has a separate confidentiality agreement with all parties they
negotiate with, and not to just rely on the overall confidentiality agreement all MBI
members have made with CMR.
d) If the meeting is progressing well, suggest to the owner/seller that you have a quick
review now with him/her on the business, particularly concentrating on any problems
there might be for a potential buyer. This will help to start identifying areas where CMR
could help. Particular opportunities to look for are:
1) Company has financial/ business difficulties
2) Company has management difficulties (MD may have died, etc.)
3) Company can't cope with problems
4) Company is really too small to compete profitably
These are only a few pointers - there will be a myriad of other aspects that could provide
CMR with opportunities to help.
e) Wherever needed - call in experts from CMR to help - don't try to do it all yourself.
CMR has experts in every business and industry area, and of course from those who
specialise in company sales/ M&A work. If in doubt call them.