Raising funds, acquiring a business or selling one are infrequent decisions for most SME owners. Preparation usually starts with a clear objective: what the company is trying to achieve, how much is needed, by when, and who has authority to decide.
What different counterparties look for
A lender’s assessment may focus on the ability to repay: cash generation, existing borrowings and security, and whether the management accounts reconcile to the filed financial statements. An equity investor may also focus on growth, management and the prospects for an eventual exit. The actual information requested depends on the counterparty and transaction. In both cases, a forecast with a realistic downside case, and figures that reconcile across documents, make the discussion easier. Where public funding schemes are relevant, see our article on preparing a funding application.
Approvals under the Companies Act 2016
Some steps need shareholder approval. Check approvals early. Share allotments, existing shareholders’ pre-emption rights and substantial acquisitions or disposals can each raise requirements under the Companies Act 2016. Ask the company secretary or legal adviser to confirm the applicable provisions, exceptions and constitution before setting the transaction timetable. Building these steps into the timetable helps avoid delays.
For owners considering an exit, see also our article on preparing a Malaysian SME for sale.
Write the decision brief before building the model
State the objective and the alternatives management wants to compare: for example, funding an expansion now, phasing it, or postponing it. Identify the amount, use of funds, decision date and parties who need to approve. Keep the company’s requirements distinct from the owners’ personal objectives.
A useful brief links four things:
- Evidence: financial statements, current management accounts, borrowing and working-capital schedules, reconciled to the same information date.
- Assumptions: sales, margin, collection timing, investment costs, repayment profile and any material dependencies.
- Sensitivities: what changes if growth is slower, costs rise or completion is delayed, and how much cash headroom remains.
- Decision: the alternatives, unresolved questions, specialist input needed and date by which each issue must be settled.
Explain any difference between historical results and the forecast. Do not treat an optimistic case as an expected outcome or assume a lender’s approval from the model alone.
Use the right depth for the transaction
An acquisition may require financial due diligence; a discussion about price may need clarity on valuation purpose and basis. Legal, tax and formal valuation work should be separately identified. Record who may rely on the analysis and for which decision.
Financial analysis helps management assess the alternatives. It does not guarantee a value or replace legal advice on the required approvals. The final decision remains with the authorised decision-makers, supported by tax or valuation advice where needed.
This article is general information only. Requirements depend on each company's circumstances; please refer to the official legislation published by SSM, and see Saifudin & Co's corporate finance and transactions services if you would like assistance.