Selling a Business or Selling a Business in Thailand Isn't as Easy as You Think

[CharlieH]

Selling a Business or Selling a Business in Thailand Isn't as Easy as You Think: Steps Business Owners Need to Know (short Version)

 

Click here to start planning to sell your business professionally. Contact Max Solutions

 

The process of selling a business in Thailand If you do it yourself without a sales consultant, the challenges that factory owners and business owners must face. We recommend business trading consultants like Max Solutions to help you close deals more easily.

 

 

The business that we devote ourselves to, built with our efforts, when the day comes to decide to sell, no matter what the reason is, such as no success , no time to take care of the business, health problems, no drive to continue growing, want to retire, want to sell the business for profit, personal burdens

 

The process of selling a business/selling a business is as important and complicated as the day it was first laid. It requires knowledge and good planning to get the best price and prevent problems that may occur in the future.

 

In this article, ASEAN Now will help business owners who are considering selling a business/selling a business in Thailand to understand the selling process and important things to know if doing everything by themselves.

 

Step 1. Prepare a team of experts

 

Selling a business is like preparing for a major sports event. You wouldn’t want to go to the field without a coach or team to help you, would you? The same goes for selling a business. Having a team of professionals to advise and support you through every step of the way will help you sell your business smoothly and get the best price.

 

Who should be on the team?

 

M&A Advisor: Acts like a coach who will plan your sales strategy, from valuing the business, finding the right buyer, to negotiating to get the best price.

M&A Attorney: Acts like a team manager, taking care of all contract documents and laws to be correct and fair to all parties, to prevent future problems.

M&A Accountant: Responsible for checking and preparing accounts to be correct, complete, and reliable, so that buyers are confident in the financial status of the business.

 

Step 2. Valuation of the business

Valuation of your own business before selling will allow you to set a fair selling price. A reasonable price plays a part in the decision of the buyer. Knowing the value of your business will help to get sales being undervalued and receiving money from the sale that is not worth it.

 

This evaluation should consider many factors. Start by calculating the seller's net profit (SDE) or EBITDA (earnings before interest, taxes, depreciation and amortization). Then use a multiplier to calculate the business value.

 

A common multiplier for small businesses is 2.0 to 3.0 times and 4.0 to 6.0 times EBITDA for medium-sized businesses. Most valuations are based on cash flow, so increasing cash flow is the easiest way to increase the value of your business.

 

The steps in valuing a business can be summarized as follows:

2.1 Financial Analysis

 

Analyzing financial statements is the first step in valuing. Consider from

 

Balance Sheet: Analyze the assets, liabilities and capital of the business

 

Income Statement: Check income, expenses and net profit

 

Cash Flow Statement: Consider the cash flow in and out of the business

 

2.2 Valuation Methods

 

There are many methods that can be used to evaluate the value of a business, such as

 

Market Approach: Compare your business with similar businesses that have been sold or valued

Income Approach: Consider the cash flow or profit expected in the future and adjust it to the present value

Asset Approach: Evaluate the assets and liabilities of the business by finding the remaining net value

 

2.3 Risk and Opportunity Assessment

 

Assessment of risk factors such as financial risk, changes in law and economic situations, as well as assessment of opportunities such as market growth, business expansion and technology development

 

However, if you do not have enough knowledge in one area, valuing a business can seem complicated because it requires expertise in many areas, including accounting, finance, law and knowledge specific to that business group. Therefore, you should consult an expert or a company that specializes in business valuation to get more accurate information.

 

Step 3. Prepare the necessary documents and information for selling a business.

 

Selling a business requires several documents and information to show the buyer the financial status, operations, and reliability of the business. These documents are evidence that helps the buyer feel confident in the business and make decisions more easily.

 

Business owners should prepare the following necessary documents and information:

 

3.1 Financial Statements

 

Financial statements are documents that show the financial performance of the business over time, such as:

 

Balance Sheet: Shows the assets, liabilities, and capital of the business

 

Income Statement: Shows income, expenses, net profit or loss

 

Cash Flow Statement: Shows the cash flow in and out of the business

Having complete and accurate financial statements will help the buyer see the overall picture of the business and assess the risks more easily.

 

3.2 Audit Reports

 

An audit report is a document prepared by an external auditor after reviewing the financial statements of the business. This report confirms that the financial information presented in the financial statements is accurate and reliable. Buyers will use this report to verify the reliability of financial information.

 

3.3 Customer Information

 

Customer information is information that represents a business's customer base, such as customer lists, trading history, purchase frequency, and other customer-related information. This information helps buyers understand customer relationships and the potential for future customer retention.

 

3.4 Contracts

 

A contract is a document that represents an agreement between a business and other individuals or companies. These contracts may include:

 

Supplier Contracts: Agreements to provide goods or services

Employment Contracts: Agreements to employ employees

Customer Contracts: Agreements to provide services or sell products to customers

3.5 CIM: Before you enter the market You will need to prepare a Confidential Information Memorandum (CIM), which is a 20-50 page document that you will present to qualified buyers who will sign a Non-Disclosure Agreement (NDA).

 

These contracts help buyers understand the business relationship and the obligations that the business has.

 

Let’s say you own a business that you are selling. Here is a list of documents and information that you will need to prepare:

 

Step 4: Consider Who to Sell to

 

Who to Sell to?

 

Before you decide to sell your business, it is important to explore your options to ensure that you choose the path that best suits your goals and needs.

 

4.1 Selling to a Family Member (Family Succession)

 

Pros: Keeping the business in the family, passing on the business legacy, creating a family bond

Cons: May cause family conflicts, if the heir is not capable of running the business, the business may be damaged or not continue well. The sale price may be reasonable and not too high

 

4.2 Selling to Employees (Employee Buyout)

 

Pros: Employees have a good understanding of the business, helping to maintain business continuity, boosting employee morale

Cons: Employees may not have enough capital to buy the business. It takes time to raise funds.

 

4.3 Selling to External Parties

 

Advantages: Often get a higher selling price because there is competition from many buyers. Give you the opportunity to start something new without having to worry about your original business.

Disadvantages: It may take a long time to find the right buyer. The buyer may not understand the corporate culture and vision of the original business. If you do not have enough networks, you may not find a buyer or it may take a long time to find one.

 

If you want the highest price… choose to sell to external parties.

 

If your main goal is to sell your business for the highest price, selling to external parties is often the best choice because there will be many interested buyers competing to offer prices, giving you a better chance of getting a better price than selling to family members or employees. You should find a sales consultant who is an expert and has a network. He will cover the disadvantages and point the seller to the right buyer. This will result in a successful sale at the best price in the shortest possible time. More than 90% of business sales in Thailand, especially businesses worth more than 100,000,000 baht, are mostly successful because of the guidance of a business sales consultant or business agent.

 

 

 

Steps to sell a business: Contact the buyer

 

Once you have considered which group you will sell to, plan to reach that target group. For medium-sized businesses, you can contact buyers directly through various channels. It is recommended to have a list of at least 100-200 buyers to create 5-10 conversations and receive 1-5 Letters of Intent (LOI).

 

Step 5. Negotiate and agree on a price

 

Once we have prepared the business valuation documents and have been able to contact buyers to buy the business, negotiating and agreeing on a price is an important step that requires high communication skills and careful decision-making. Business owners should be well prepared to ensure smooth negotiations and maximum benefit.

 

5.1 Study the market and competitors

 

Before negotiating, business owners should study the market and competitors to know the market value of businesses in the same industry and use this information to set an appropriate price, not setting a ceiling price that is too high to sell or too low to make a loss.

 

5.2 Prepare necessary documents and information

 

The documents and information prepared in the previous step will play an important role in the negotiation. Financial statements, audit reports, customer information, and contracts should be used as evidence to support your offer.

 

5.3 Determine the scope and conditions required

 

The business owner should define the scope and conditions required for the sale, such as:

 

Payment terms: Will it be paid in cash or in installments?

 

Transfer of assets: Will all or some of the assets and equipment be transferred?

Retaining the current employees: Will the buyer keep the current employees and executives?

 

 

5.4 Prepare negotiation skills

 

Negotiation requires communication, listening and negotiation skills. You should practice these skills or consult with a business/business sale expert to help the negotiation go smoothly, maintain your advantage and successfully close the sale.

 

If the buyer is interested, they will present an LOI, which is a preliminary agreement before entering into a sales contract. As a seller, you should proceed carefully in negotiating the LOI because this is the last step where you have the power to negotiate. The terms and conditions should be specified as clearly and comprehensively as possible in the LOI.

 

5.5 Analyze the buyer's offer

 

You should carefully consider the buyer's offer, including checking the buyer's financial capability, to ensure that the buyer can comply with the agreed terms.

 

5.6 Create a backup plan

 

You should have a backup plan in case the negotiation does not go as expected, such as preparing to find another buyer or adjusting the terms to suit the situation.

Step 6. Make a sales contract

If both the business owner and the buyer are satisfied with the offer, the legal process will begin, drafting a contract to completely transfer the business to the new owner.

 

A good contract will help the sale/sale of the business go smoothly and transparently, avoiding conflicts that may arise in the future.

 

The following are the steps in making a sales contract that business owners can use as a guideline:

 

6.1 Preparing the draft contract

 

Start by contacting a lawyer to prepare a draft sales contract, which should cover all the details agreed upon during the negotiation process, as follows:

 

Seller and buyer information: Names, addresses, and contact details of both parties

Details of the business being sold: Type of business, location, asset details, and related information

Purchase price: Agreed price and payment method (e.g. cash, installments, or other methods)

Payment terms: Payment schedule and money transfer terms

Asset transfer: Details of the transfer of relevant assets, such as equipment, tools, inventory, and other assets

Transfer contract: Agreements regarding the transfer of contracts with partners and employees

Additional terms: Special terms agreed upon, such as retaining existing employees, training new buyers, or maintaining business confidentiality

 

 

6.2 Review the draft contract

 

A lawyer or legal expert reviews the contract again. Ensure that the contract is complete and accurate. Having a lawyer review the contract will help prevent future conflicts and legal problems.

 

6.3 Negotiation of Contract Amendments

 

If there are amendments or additional offers from either party, negotiations should be made to improve the contract to the satisfaction of both parties. These additional negotiations may involve adjusting payment terms, adding special terms, or amending unclear terms.

 

6.4 Signing the Contract

 

Once both parties have reached an agreement, the sales contract should be signed, with witnesses certifying the signatures of both the buyer and seller. A copy of the contract should be kept by both parties as evidence.

 

6.5 Execution of the Contract

 

After signing the contract, the agreed terms should begin, such as transferring assets, making scheduled payments, and transferring contracts with partners and employees. The execution of the contract should be continuously monitored and reviewed to ensure that everything is as planned.

 

6.6 Closing

 

Once all steps have been completed and all payments have been made, the sale should be officially closed, with the signing of the closing document and the transfer of ownership of the assets to the buyer. The closing should ensure that all relevant evidence and documents are preserved.

 

What are the challenges of selling a business without an M&A advisor?

 

Solving the problem of not being able to sell a business

 

Did you know? According to Morgan & Westfield, the success rate of selling a business is 15% - 30% for small businesses, while medium-sized businesses have an estimated success rate of 30% - 40%.

 

From reading the steps above, you can see that the process of selling a business, if done by yourself, from the process of building a team, is not easy for you to be in the group of 30-40% successful. Along the way, you will encounter many minor headaches, such as documents, legal problems, and negotiations. The following are the major challenges that you will definitely encounter if you go it alone.

 

1. Difficult to find the right buyer

 

Finding the right buyer is a step that takes a lot of time and effort. Many people seek help from a business broker or a business sales consultant to make it easier to close a sale, even if they have to pay a sales commission.

 

If we do not know the market source, the chance of finding a buyer who is interested in and understands your business is difficult. How much experience and skills does the buyer have in business management? How will it lead the business you have built to prosperity or failure? These are things that many business owners consider and give importance to.

 

Another point to consider is whether the buyer has enough capital. If he does, but it does not reach the price you want, You will have to spend more time finding new buyers.

 

2. Negotiation requires advanced skills

 

Negotiation is an important part of selling a business. You need to be able to communicate and negotiate to get the best price and terms. Good negotiation requires preparation. You need to have all the information and documents ready, know the value of your own business and be able to explain it to the buyer. No matter how well you prepare, if you are weak in negotiation skills, you may be at a disadvantage.

 

3. Laws and taxes

 

Selling a business involves many laws, such as business law, tax law, and labor law. Not understanding these laws may cause you to face legal problems later on, such as:

 

Illegal contracts: If the sales contract is unclear or has errors, it may cause conflicts.

 

Violating tax laws: You may be fined or face financial problems. In the case of selling without a specialist consultant, you may have to pay taxes as high as 35% instead of making a profit. You may end up in debt instead.

 

Managing employees after the business is sold: If you are not aware of labor laws, transferring employees can become a lingering problem.

 

Business sales consultant: Max Solutions M&A services help you sell your business/business more easily.

If you are not sure that selling yourself will be successful, we recommend Max Solutions, a professional business consulting firm and a center for M&A in Thailand, specializing in Mergers & Acquisitions. With our experience and expertise, you can be sure that selling your business will be smooth and yield the highest returns.

 

 

Why choose Max Solutions?

 

No upfront payment: You do not have to pay anything until you successfully sell your business.

 

Extensive buyer network: We have a strong network of buyers and partners, which will increase the chances of selling your business/selling your business faster.

 

One-stop service: We take care of every step from start to finish, whether it is valuing the business, finding the right buyer, negotiating, or signing a sales contract. Therefore, sellers do not have to worry about documents or legal procedures.

 

Add value to your business: We have strategies and techniques to add value to your business to get the best selling price.

 

MAX AI: MAX AI matching system is developed in collaboration with a team from Stanford University to increase the efficiency of matching with buyers in the network to minimize the management time.

 

Experienced team: The same team from 50 years of legal and accounting work from Thanomsak Law and Accounting Office.

Tax planning (special): Helps with tax planning, significantly reducing tax burdens. Which is comparable to selling by yourself, may have to pay tax up to 35%

 

Special for Thai business owners

 

Free consultation: You can consult about selling your business for free, no charge.

Free business promotion: Help promote your business to Max Solutions's investor network.

Find buyers first: We conduct a buyer survey for you before you decide to use our service.

After the business is sold/sold successfully, the seller pays only 3%-10% service fee, depending on the size and complexity of the transaction.

 

Click here today to start selling your business/selling your business professionally. Contact Max Solutions https://maxsolutions.co.th/

 

Line ID: @MaxSolutions 

Phone: +66 89 776 4545

Location

50 Soi Phatthanakan 64, Prawet Subdistrict, Prawet District, Bangkok

 

Email

[email protected]

 

Special for investors or those interested in investing

 

We have a business procurement service for you: If you are interested in buying or merging businesses in Thailand, Max Solutions has a business selection service that meets your needs.