Whilst there is much uncertainty in the air in post-election UK and Brexit, one thing is certain - the UK caravan and holiday park industry has seen phenomenal success in an industry boom assisted by big-budget mergers and increased caravan and holiday home sales. Since families nowadays are often opting for 'staycations' instead of going abroad, the caravan and holiday park industry is thriving, with the sector currently worth more than £6 billion annually to the UK economy.
We are finding that our clients are now looking at selling and taking advice early. Even if you have no intention of selling your park business, it is important to take a step back from the business and consider what a potential purchaser might see and more importantly what they might be looking for. Taking this approach will improve the business for you, the existing owner, and if you do want to sell at some point make it more appealing for subsequent owners in the future.
What does a potential purchaser want?
Regardless of the type of business, a purchaser will want to see two things:
- Sustainability; and
- Profitability.
In order to consider how to achieve a sustainable and profitable business you must look at how a purchaser will measure it. It helps to look at what a purchaser would look for when carrying out the due diligence process of a purchase.
This can include:
- the way that the business is financed;
- the business documentation and contracts that you have in place with other parties;
- who owns the land and what rights there are over it;
- reviewing all existing planning permissions etc and establishing if there is any future development potential for the site within your existing consents;
- the employment structure and relations - whether good terms and conditions and staff handbooks are in place;
- whether you have the correct licences, consents and permissions you require to be able to operate your park business;
- how the accounts make the business look; and
- how the business is treated for tax purposes.
The sooner you start to think about what a potential purchaser will look for the better placed you are to structure your business to maximise its value now and in the future. The majority of purchasers want to buy a business that is both profitably trading in its current form, as well as having some future potential for expansion. Having considered this, the next thing to do is think about which areas of your business need improving and the best way of achieving those changes to make the business more appealing.
Just doing a couple of things helps. For example:-
1. Do you have Pitch Licence Agreements in place?
During the due diligence process in the lead up to a holiday park sale, one of the first things that we as solicitors acting for a prospective buyer will ask to see are the Pitch Licence Agreements for each of the caravan owners on the park. A buyer will want to know that they are promised pitch fees for the future and that if a caravan owner fails to pay that they can use the agreement to resolve the issue or remove them.
So it is important that your Pitch Licence Agreements are in place and up to date.
For more information on see our article.
2. Title to the Land
The largest asset by far on a park is usually the land. It is important to make sure before your park is put on the market that your title to the land is checked and cleaned up as much as possible.
A buyer and any bank will look at the title very carefully and use any discrepancy to reduce the price or withhold payment. Discrepancies can also mean a bank is less likely to fund a buyer or fund less which could put off the purchase altogether.
3. When was the last time you updated your Park Rules?
Keeping your Park Rules up to date is also a fundamental part of running a successful business, and maximising profitability. Well drafted, appropriate and legally binding Park Rules will help you to:
- Run a safe, efficient and welcoming park
- Prevent, manage and solve disputes
- Reduce unwanted behaviour
- Protect your park from damage
- Attract the right kind of customers
- Remove unruly owners
- Improve profitability
More detailed guidance on Park Rules can be found here.
Designed to help you make the right decisions when drafting Park Rules, the guidance contains suggested content and advice on implementation, as well as best practice tips for changing your rules. It also includes information about the most recent legislation changes, and whether your business is affected.
4. Do you have a strategy for exit?
Succession planning is an integral part of achieving the maximum value from your business but it focuses on the exit rather than the day to day profitability and sustainability of your business discussed above.
For every park owner it is a balancing act between meeting today's needs and reaching tomorrow's goals.
There are a number of obvious exit strategies:-
- Management Buyout
- Private Sale
- Family
- Solvent winding up and distribution
The most appropriate form of exit will depend entirely on your main exit objective i.e. do you want to achieve the maximum value from your exit or do you want to protect the interests of the business for the next generation of your family?
We appreciate that the prospect of handing over your business is a difficult decision to make and is one that requires a serious amount of thought and consideration before the final decision is made.
The earlier you start though the better.
The process of sale
Having made the difficult decision to sell your business you must decide what is the best way of doing so. To do that you should take into account how the type of sale could improve or reduce the value of your business.
We think that the best person to sell your business is you, with assistance from your close advisers.
At SJP Law, our team have extensive experience in the purchase and sale of parks and are able to help you negotiate the terms of the sale or purchase to achieve your goals, guiding you through the process from start to finish. It is an exciting and stressful time for any business owner, and our aim is to ensure that you gain the maximum value from your negotiations, in an efficient manner.
If you are looking to either buy or sell a holiday park, or want legal support with any aspect of running your holiday park, please contact our team on 01482 324 591, or email info@sjplaw.co.uk
More detailed guidance on achieving maximum value from your business can be found in our five part series - coming soon.
Part 1 - Sustainability and Profitability
Part 2 - Succession Planning
Part 3 - Is incorporation the next step?
Part 4 - Selling a business
Part 5 - What to do with the proceeds
Further information about our holiday parks service can be found here.
