Consumer products maker Reckitt Benckiser – the name behind Finish dishwasher detergent, Vanish stain remover and Strepsils lozenges – has played down speculation that a sizeable acquisition is on the horizon, despite unveiling a cash build-up as it reported its fourth-quarter and full-year results this week.

The firm's sales went up 18 per cent to £7.75 billion in 2009, while underlying sales growth rose ten per cent from October to December alone. Annual pre-tax profits increased 28 per cent to £1.89 billion, having risen 17 per cent to £607 million in 2009's fourth quarter.

Reckitt's cash generation last year meant it went from having net debt of £1.1 billion to net cash of £220 million.

However, Bart Becht, chief executive of the Anglo-Dutch group, says another Kraft-style takeover is unlikely, suggesting there's a greater chance Reckitt's acquisition criteria will lead to bolt-on deals rather a mega-merger because the household goods industry is already heavily consolidated.

Meanwhile, fellow cash-rich FTSE 100 company Autonomy, the Cambridge-based search technology specialist, has indicated it will use its reserves to buy US businesses and expand its technology into new markets in the process.

The firm revealed this week it raised £500 million through a bond issue that was priced and sold in just two hours, adding to its existing cash reserves of £155 million.

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It might have been given a week-long stay of execution after the winding-up petition against it reached the High Court yesterday, but don't be surprised if Premier League club Portsmouth is tipped into administration anyway.

The owners of the club were told in court that they have a week – until 4pm on 17 February, to be precise – to file a "statement of financial affairs" proving they can clear over £12 million in tax arrears.

But according to insolvency specialist Guy Thomas from SA Law, a week may not be enough time to come with such a statement.

As such Thomas, who advised Watford FC when it faced administration last year, suggests it's "inevitable" Pompey will fall into administration.

"Given the minimum nine-point penalty that the Premier League may impose, it is highly likely that the club will prepare its finances on the basis it will be in the Championship next season," he adds.

The adjournment of Portsmouth's winding-up order was granted after the club's representatives claimed they've received two serious offers to sell the business, though a High Court registrar warned that the club might be trading while insolvent.

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Hot on the heels of Crystal Palace Football Club's confirmation that it had fallen into administration after months of financial hardship, it's claimed Portsmouth faces the same fate unless a buyer snaps up the business in the next eight days.

The organisation fell short to the sum of £2 million as the transfer window closed last night, and not even the £3.5 million sale of keeper Asmir Begovic to Stoke will be enough to keep it afloat, according to sources speaking to The Sun.

It's thought the club has a £7.5 million tax and VAT bill that it hoped to pay by selling enough players before a High Court winding-up order next week.

A club insider tells the newspaper: "The end is very close. Unless someone comes in with a load of new cash within the next week, the club will almost certainly go bust. If the winding-up order is upheld, we simply can't pay the Inland Revenue."

Crystal Palace administrator Brendan Guilfoyle has said he's confident a buyer for the club will be found, claiming he is working "flat out" to sell a business he describes as an attractive proposition in spite of its financial problems.

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The importance of due diligence to the success of a transaction is often underestimated. We thought it might be useful to put together a few pointers to keep in mind while running a due diligence exercise on a business you are intending to buy. A more thorough explanation of what is required is available to subscribers.

Approach the whole process with a very objective and critical eye. When you have seen a business to buy it is very easy to get carried away and marvel at your own cleverness at seeing such a good opportunity. But always remember that it is much easier to evaluate what has been presented in a memorandum of sale than to spot what has been left out.

Get the right advisors

Buying a business is a team effort and the most important members of your team are your accountant and your solicitor. Make sure that you have a good working relationship with both and they are properly instructed. If you need to appoint new advisors do so on recommendations to ensure they have the appropriate skills.

Plan it, scope it

Define the scope of the due diligence exercise and clearly mark out who is doing what and when. Work to a timeline. In order to conduct a thorough investigation you must have everything in order before the due diligence process begins. In fact, you must start your due diligence preparation and information gathering the moment you decide that you are interested in a particular business. You will need the following:

An exact step-by-step plan of the entire due diligence exercise.
All of the information and relevant items you need from the seller before you start the analysis.
A checklist of… (more available to subscribers)

Employee issues

Thorough due diligence should pick up any issues, risks and potential liabilities relating to the seller’s employees. For instance, check if there are any past or present employees litigating against the business. Other important areas to look at might be the following.
Do any of the employment contracts have unusual clauses i.e. over-the-top redundancy packages?
What are the specifics of the pension plans?
What is the bonus structure and is it rewarding performance fairly?
(more available to subscribers)

Move fast, top down

It is important to spot any issues early on so that the appropriate warranties and indemnities can be quickly put in place. As these are legal documents, which are meant to protect both the buyer and seller from things going wrong, they can be complex, expensive and take time to put together. Focus on major issues first.

Communication is vital

The flow of communication between the buyer and his/her solicitors is of paramount importance, for if they do not work closely together, the process can quite simply fail. The buyers must communicate the key issues of concern to their solicitors; they should not just assume that all areas are of equal importance, and that everything will be dealt with in good time. Continually monitor the activity of the solicitors and accountants carrying out your diligence and make sure they are giving you regular feedback.

Don’t forget the culture

Funny how the lack of understanding of the target’s company culture is one of the main reasons for failed acquisitions, yet this has been notoriously ignored in the due diligence process. Don’t make the same mistake. This is usually one for the purchaser’s management to consider, rather than delegating to legal or financial advisers. Map out the management styles of your business and the target business. In the report we look more closely at the culture of a business.

Collect information, then analyse

Don’t let any of your advisers analyse whilst collecting the information. These are two distinct activities within the due diligence process. First find out where the required information is, then collect the information, recording its source and noting whether it is fact or hearsay. Then start an objective analysis.
Finally, make sure you differentiate between fact and opinion. Information that is presented as fact should be signed off by the target company’s directors.

Don’t panic, take your time

A focused but comprehensive approach is better than taking shortcuts in order to reduce costs. Often the buyer discovers that ‘thin areas’ of diligence need to be covered again in more detail, ultimately consuming extra time and costs.

In partnership with the Business Sale Report Smithfield Partners Solicitors and WM ProServ LLP, accountants are offering £5000 worth of free legal or accounting Due Diligence. What is the catch? This offer is only available to the first 5 companies that apply via the Business Sale Report. To qualify you just fill in our due diligence enquiry page.

We wish you luck in finding a great investment for 2010!

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Businesses are inevitably suffering because of Britain's cold snap, but head teachers can do their bit by not closing schools too readily. That's what the Federation of Small Businesses (FSB) has to say about the matter, as thousands of schools across the country shut up shop during the freeze.

According to the organisation's Stephen Alambritis, a lot of companies in the UK suffering from staff shortages are feeling the sting of parents forced to stay at home to look after their offspring. A firm employing four people, he noted, loses half its workforce if two people have to be at home because their children have been sent home from school.

While the FSB "appreciates" parents' predicament, he told BBC Radio 4, the body is concerned that officials haven't sat down and thought through "a code of practice" to make sure schools are closed only in exceptional circumstances.

Alambritis added: "We all know that the vast majority of children are within a small catchment area to attend school and so there is a concern that head teachers may be closing schools unnecessarily."

Representatives for schools and colleges have countered that decisions about closures are made on the basis of a given school's local situation.

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The government's National Investment Corporation (NIC) – a fund to help small businesses – may need an injection of taxpayers' cash to make up its £1 billion finance target. According to reports, officials will nonetheless try to reach an agreement with retail and investment banks on the fund by the end of the month.

Suggestions that the scheme had encountered problems first emerged after eight investment banks – previously asked to contribute £25 million each – refused to co-operate when they learnt about the bonuses tax in the chancellor's pre-Budget report.

Investment banks are also said to want the NIC funds to be put into their own pots which invest in the UK economy, while retail banks want funds to go towards directly extending loans to small firms.

The Times compares the aim behind the NIC to that of the Industrial and Commercial Finance Corporation, a body set up in the wake of the second world war to help smaller companies.

A £100 million contribution has already been promised by Royal Bank of Scotland, as it has by Lloyds – another institution now part-owned by the taxpayer. Barclays and HSBC are expected to contribute around £25 million each to the NIC.

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Consulting firms sell "time", such as that of solicitors, accountants or architects, and can offer strong profit growth and cashflow, as well as representing saleable propositions with significant equity value. Contrary to common belief, M&A activity within the sector is strong, with around three-quarters of deals made valued under £30 million.

Evidence of the demand for smaller consulting firms exists in the fact that the current most popular size of agreements is around the £4 million mark, with the most recent high-profile deal remaining the £76m acquisition of RSM Bentley Jennison by Tenon.

Valuing a small or medium-sized consulting firm

Pre-tax profit multiples for consulting firm sales are completely dependent on the circumstances of a business sale, i.e. the market conditions and the profit potential of a given firm.

When selling a consulting business, bear in mind the following:

• A greater business sale price is more likely if buyers can see evidence of profits being made at the time of the sale. Projection of future sales and profits boosts the chances of achieving the highest multiples. Pre-sale efforts should be concentrated on establishing a strong sales and marketing process indicating a strong pipeline of business and removing the usual risks that come with operating a consulting firm.

• To create equity value in a consulting business, you should be able to show consistent growth in both profits and your revenues. Erratic accounts are a warning sign to buyers, so don’t consider selling until stable results have been established.

• If buyers can see a strong sales and marketing operation in place, they know they can simply pull the "marketing lever" harder to boost sales and profits down the line.

• Firms with a unique selling point (USP) are more attractive to buyers by virtue of being less at risk from competitors and more able to command the market. Such companies are also in a position to charge higher fees and find business easier. Firms without a USP ought to invest in areas like competitor analysis, market research and win/loss reviews to find an expertise gap in the market.

• A feeling of involvement and team effort on the part of your company leaders will let potential buyers see you have a balanced and experienced team who are dependable and loyal – working "on" the business rather than "for" it.

• Buyers will also want to see signs of good relationships with everyone from market influencers and dormant clients to decision makers and older contacts.

Businesses with low debtors on the books will be more appealing than those with less credit-worthy clients. This is a more salient point than ever as the percentage chance of recovering debts has reduced rapidly in today’s market.

Preparing for a consulting business sale

To ensure a potential buyer’s due diligence does not uncover any surprises, external advisers should be employed to help with preparing a consulting business for sale.

With regard to operations, outstanding negative issues should be addressed. Changes likely to boost future profits should be introduced, for example streamlining teams, dealing with nuisance employees and shareholders, making sure contracts are up to date and dealing with any litigation matters.

Regarding finance, any questionable expenses or assets should be tackled to insure against potential buyers finding anything dubious in your accounts.

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At the Business Sale Report we have undertaken a straw poll of the business brokers and other professionals in the small to mid-market M&A industry to see how they thought 2010 would be for the buying and selling of businesses. Subscribers to the report can see who said what. So here are some of the opinions of the movers and shakers in the industry:

“Investors seem to be thinking that 2010 will be an improvement on 2009. People who have access to liquidity are making tentative signs they are willing to invest in the middle of the year when the situation should be clearer. Investors who can be creative when it comes to financing a deal are in a great position.”

“At the moment there appears to be a disconnect between the real business world and how the bankers who are funding businesses are operating. Recently there have been more signs of banks lending but they are only lending to people with a good track record, and also really only looking at one project at a time. However, some banks are lending at 75% debt for equity. The February bank reporting season will be important for the confidence of M&A in 2010. Asset-based businesses and those involved in the Internet I expect to be the best M&A prospects for 2010.”

“The market in businesses valued at between £1m and £2m has seen growth so far in the last quarter. I am therefore very positive about the outlook for 2010. People are looking to sell at the moment and funding is not too difficult for the right deal.”

“I am expecting 2010 to be better than 2009 but the outlook for 2011 is more uncertain as there may be more forced sellers then and prices for businesses will fall.”

“Some businesses are happy to sell assets to strengthen balance sheets. There will always be deals to be done but I envisage more forced sellers. My advice to anyone looking to buy a business in this market is to stick with what you know, as there are good deals to be had.”

“If unemployment hits 3 million then we will be in trouble. There are simply not enough smaller businesses on the market at the moment and demand has outstripped supply for good businesses. People are desperate to buy for turnover, as they want to exit in 5-10 years. People are not coming to the market as they think they will not get a good price. If the business is a good one and there are synergies with the buyer then businesses are selling for decent money.”

“There is no appetite for acquisitions of businesses with a high premium on goodwill. The banks have a policy that they will only lend on the value of goodwill if assets of the same value are used as collateral for the loan. I cannot see a revival of fortunes for engineering businesses for 2010. However I believe that Health and Safety businesses and those involved in the medical sector will be in demand next year.”

“I expect 2010 to be better for buying businesses but we are starting from a very low base. With a low volume of private equity transactions it is hard to gauge how strong the Limited Partnerships will be going into next year, as they haven’t really been tested. An expected change in Government will no doubt cause some uncertainty for the prospects in 2010.”

So there we have it, a mixture of positive and negative sentiment on the prospects for 2010. We certainly agree that any business with a good asset base and with good contracted positive cashflow will be a good prospect. To find out who said what, you will need to subscribe to the report. We believe that 2010 will be a good opportunity for buying businesses as long as you know exactly what you are doing as mistakes will be very costly. Make sure you have done good due diligence, have a good relationship with your funding partners and be ready to move quickly.

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Demand for hotels for sale in the UK has been stimulated by an influx of newcomers to the hospitality industry, with particular interest focused on the cheaper end of the market.

If you’re one of the many keen for a change of career, contemplating early retirement or worried about redundancy, there are annual profits of around £20,000 to be made from the average five-bedroom guesthouse, going up to £130,000 for a 20-bedroom hotel including a bar/restaurant.

Allow half of that to cover the costs of running the establishment, bearing in mind that business rates and compliance with fire regulations will apply if you acquire anything bigger than four letting bedrooms.

Brokers say anyone with equity of at least £100,000 in their home is in a healthy position to buy a small hotel – chances are you’ll need to take out a mortgage, but the lowest interest rates for fifty years mean any reasonable operator should be able to take home a decent profit.

Things to bear in mind when sizing up hotels for sale:

Why is a given outlet on the market and how long has the current owner been there? How much has been spent on improvements?

What kind of custom does it attract? Are there any other new hotels in the pipeline in the area?

What is and isn’t included in the hotel sale? Take a detailed look at the contract and accounts.

And finally, don’t underestimate the benefits to be gained from getting a hotel’s previous owners on side – their help and goodwill often prove invaluable to buyers.

For more resources on buying a hotel please visit our pages which list leisure businesses and hotels for sale and more advice on buying a hotel.

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The UK’s retail sector faces another “bloodbath” on the high street next year, according to insolvency specialists. They point to decreased spending and rising unemployment as reasons to expect a wave of administrations echoing the events of early 2009.

In spite of improving sales figures and a boost in sentiment, 86 per cent of insolvency practitioners polled by industry body R3 believe this year’s drop in spending will prompt the collapse of more retailers after Christmas.

Another factor singled out for the predicted disappearance of over 20 household names is creditors “biding their time” until after the peak trading period before they call in loans. January’s VAT increase is a further cause of pessimism for retailers.

“While it would be comforting to think that the worst of the downturn is over, it’s worth remembering that insolvency peaks after a recession ends,” remarked R3 president Peter Sargent. “We urge retailers to seek advice early when there is a better chance of rescue, rather than desperately clinging on, hoping that Christmas will cure all ills.”

In the opening months of 2009, around 22 high-street retail staples went into administration, including Woolworths, music outlet Zavvi, childrenswear chain Adams and tea and coffee merchant Whittard of Chelsea. For up-to-date information on businesses for sale and in administration take a look at our news section.

–>Latest retail businesses for sale.

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