Case Study for Sale of Hair Salon in Birmingham
Terence Marshall and Adrian Taylor had owned a very successful and high-profile hair salon at 71 High Street Harbourne Birmingham B17 9NS. They also owned the freehold. Terence wanted to sell outright, and Adrian was happy to sell and to stay on in the business as a stylist. They had taken the business as far as they felt they could and were now looking for an exit. They also wanted a good tenant that could continue the success of the salon.
Terence, a member of the NHF (The National Hairdressers Federation), found ETS Corporate from NHF website. He was happy that we had the appropriate experience within the industry to handle the sale. He liked the added credibility that ETS Corporate were recommended by the NHF and also prepared a webinar for their members that were considering selling their salon.
He also liked the fee structure and the fact that ETS Corporate do not charge upfront fees like a lot of other agents and charged only on a successful sale.
Terence first spoke to Zach Dogar in April of 2018 to seek initial advice. The position was complicated by the fact the Suyo Hairdressers had 3 different trading entities, and the salon went to market in August 2018.
Because the salon was one of the premier ones in Birmingham, it got huge attention. The sale had to be carefully managed to ensure only relevant buyers were put forward. Three groups in the industry showed serious interest, including an international organisation looking to increase presence in the UK.
Eventually, terms were agreed with Suhail Shaikh of Brighter Beauty Group Ltd. Negotiations were complicated as it was a share sale and terms of the lease also had to be agreed. Three full days of negotiations involving Zach co-ordinating the finer details with all advisors concluded in the transaction completing on 3rd February 2020.
The Business
Suyo Hairdressers is a very successful salon and was established in the 1960’s, and Terence and Adrian had been there since 1987. The salon turnover is in excess of £750,000 pa, with a net profit in excess of £130,000. The business is a turnkey operation with 30-35 staff. The premises were also very impressive, with 17 workstations and 2 therapy rooms, so was room for growth.
The Challenge
Zach knew that this salon, because of its size and success, would need to be sold to either an investor or a group within the industry. An international group showed initial interest, as did two private investors. A London group also gave the proposition some serious consideration but did not put forward an offer because of its distance from London. ETS Corporate also organised a LinkedIn campaign to alert all potential national groups of the opportunity. It was helpful that Zach Dogar has a very prominent LinkedIn profile with many connections in the industry. As ETS Corporate is the leading broker in the hair and beauty industry, we are well known for providing quality businesses.
Literally, hundreds of leads were generated, and the main task was to ensure that time wasters and unqualified Buyers were filtered out.
Our Solution
The very first step in the process was to agree a market price. To test the market, the original asking price was maximised and was reduced once we had market feedback. The final market price agreed upon by Zach was then comfortable for him to justify. We then ensured we had all documents available before we went to market and had undertaken much of the due diligence on the business early on. In our experience, if you are not fully prepared, then a sale can be delayed. Any potential issues that may hinder a transaction should be dealt with in advance.
Our business questionnaire is designed to extract essential and comprehensive details of a business, including SWOT analysis to help formulate an effective marketing strategy designed to maximise price. In this case, a comprehensive Information Memorandum was prepared, so that when an interested party did come along, the whole process would happen very swiftly and there would not be any delays, even when the file was handed over to solicitors.
We also had to agree a marketing memorandum to place on websites and to send to competitors which maintained confidentiality but at the same time was able to attract buyers.
We always involve the client at each and every part of the process, putting them firmly in control and advising them each step of the way.
We understood that this opportunity would probably attract a private investor from the hair and beauty industry or an acquisition by another competitor. The business was discretely exposed via the Internet using our website www.ets-corporate.com, www.businessesforsale.com and www.daltonsbusiness.com.
Our market research team approached appropriate chains and exposed the opportunity to various other salons within the industry, both local and national. We have access to market intelligence software which helps us identify the right financial profiles of potential acquirers. Once a party had expressed an interest, they were sent a very comprehensive Non-disclosure agreement to sign which protected the businesses’ identity, client base and staff.
We were very flexible in our approach. Once negotiations started with the eventual acquirers, terms were carefully negotiated including:
Purchase Price including payments
Structure of the deal to maximise the deal tax-wise
The lease terms
Rent payable
Deposit for rent
Consultancy package for Terence
A self-employed contract for Adrian
The Heads of Terms were drafted by Zach, and the matter then proceeded to the solicitors. We then had to work very carefully with the Sellers to ensure their interests were looked after. In a sale involving a leasehold property, the Landlord and his Solicitor are also involved in the process, so this stage can be very complex and has to be carefully managed. Each stage of the negotiating and due diligence process was keenly negotiated by all parties. Often, there was a breakdown of negotiations between the parties, and Zach had to intervene to ensure that all parties were comfortable moving forward. In total the due diligence and legal stage took almost 7 months.
Results
ETS Corporate were able to sell the business to a company within the industry as the sellers were keen on having a credible tenant who could continue the success of the business. Please see Terence Marshalls video testimonial and his experiences throughout the process.
Book your free consultation with the author of this post Zach Dogar. Zach, has over 20 years of experience as a business broker and has helped hundreds of business owners prepare and sell their businesses.
Opmerkingen