Selling an MOT Garage
Case Study: Sale of Triple S MOT Centre
Name of business: Triple S MOT Centre
Type of business: MOT and Tyre Centre
First Contact with Client: May 2015
Instructed to market: 5th January 2017
Found Buyer and agreed terms: June 2017
Date sold: 26th April 2018 after elongated legal process
Initial Price: £775,000 including all assets
Sold Price: Full asking price
The business is located on Belgave Road in Slough. It is cited on a prominent location on a corner of a main arterial road, with Belgrave road being a residential area. They are the largest independent MOT and Tyre Centre in Slough; in fact, in the past Kwik Fit operated on this site for almost 10 years, so it is a very well known position within its industry.
It was established in 1977 and was a family operated concern. The sale was to be highly confidential as there were concerns around the effect a sale would have on the staff. The business provides MOTs for all types of vehicles as well as a fast fit tyre and repair Centre. It employs 9 staff, including 1 manager, 3 testers, 3 mechanics, 1 receptionist and admin staff. In terms of marketing the main source of new business is recommendations and repeat business. The business also benefits from many trade accounts.
The family owned the freehold, so wanted a Buyer that could ensure the long term success of the business and to make sure the staff were also looked after.
The turnover was in excess of £650,000 pa with an EBITDA of around £90,000.
Circumstances of sale
The business was Owned by a mature couple, and was largely operated by their daughter Sharon Soor. It was run by the staff, but Sharon’s parents wanted to retire and she wanted to move on in her career. There was huge potential in the business and the family were only offering a basic service, but by offering MOT repairs, and servicing the business could thrive in the future. The family did consider selling the freehold, but due to tax implications decided to sell the business and find a good leaseholder.
Client's decision to work with us
They did have a whole host of other agents, but felt that ETS Corporate could do the best job, largely due to the deal making experience of Zach Dogar and the personal service offered. They had to speak to various agents and also decide which was the best option for them; to sell the freehold or sell the business as a leasehold.
What was most important when they evaluated their options: Experience and a team they could work with. Sharon is a very experienced business woman and needed a strong team to work alongside her.
The very first step in the process was to agree a good market price. The delay of over one and a half years in coming to market allowed the accounts to be tidied up and a good financial record to be established. The business has been operating under different entities and these were brought together so that the finances of the business could be understood. The eventual 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 and any potential issues that may hinder a sale are dealt with in advance. Our business questionnaire is designed to extract important and comprehensive details of the Business including a SWOT analysis to help formulate an effective marketing strategy designed to maximise price. 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 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 motor car 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 also approached appropriate Companies and also exposed the opportunity to various other organisations within the industry to both local and national operators. We have access to market intelligence software which helps us to 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’ client base and staff.
We were very flexible in our approach. The Owners wanted to test the freehold market, and then place the business on the market almost 2 years later. In June 2017 Mr Paresh Shah, Director of BP Autocare Ltd showed an interest in the business. He was a private investor and entrepreneur that had been involved in the motor car industry for most of his business life. He had previously Owned a national chain of car parts retail units, which was a family run business. Zach had various meetings with him, and started the negotiation process to secure a buyer and the business was taken off the market in November 2017 when HOT’s were agreed, which were initially drafted by us.
We then had to work very carefully with the Sellers to ensure their interests were looked after as the Buyer had a very shrewd and experienced legal and financial team. Each stage of the negotiating and due diligence process was keenly negotiated. Often, there was a breakdown of negotiations between the 2 legal teams, and Zach had to intervene to ensure that the deal stayed alive. In total the due diligence and legal stage took almost 11 months and in particular the following points of contention existed, which we were able to help overcome:
The terms of the lease and the rental payments, including deposit negotiations
The valuation of the business
The asset list
Terms of the sales agreement including tax efficiency and payment terms, and the deal eventually struck was for all monies to be paid up front for the business and the sale price came under the full Entrepreneurs Relief, making the deal extremely attractive.
Negotiating the handover period.
Maintaining confidentiality throughout the whole process, protecting staff and clients
The deal could not have been concluded without such an experienced negotiator as Zach with both parties threatening to pull out regularly during the 11 months’ negotiations. During the process, Zach kept close contact with Sharon and the Buyer Paresh via text, mobile and WhatsApp, even during evenings and weekends. Also, what was useful for Zach was to have face to face meetings with both parties to ensure a continued dialogue.
The Clients were more than happy with the result having achieved the full asking price even though the negotiations and the whole process were long and stressful. Zach himself conceded that this was the most difficult negotiation he has been a part of which managed to produce a sale.
Would you like to discuss the sale of your business?
Book your free consultation with the author of this post Zach Dogar.