Helen Mead
Partner, Head of Corporate Finance

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Selling your business

Selling your business

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Helen Mead
Partner, Head of Corporate Finance

helen.mead@asb-law.com

Selling your business

So the time has come to close the book on this story. You have spent a considerable amount of your life running your business, thinking about running your business and running around after your business. You have loyal customers and staff who seem content. You probably have forgotten what it is like to have time for yourself! Or you may be planning your next big project!

You may be ready to sell, but how ready is your business to be sold?

Beyond the trials of actually finding a buyer (this can be aided by corporate finance advisors) you need to consider how your business will be sold and whether everything is ready to withstand the scrutiny of a buyer’s investigations.

The buyer could be a competitor or supplier who has close links to your industry and your operations. You may be in a position to contingency plan your retirement through a staff based business acquisition. Management Buy-Out’s are generally led by the senior managers who have had day-to-day involvement with the business and they will therefore understand the business and they may share your vision for the future.

Taking steps early will help you reduce potential risk areas for a buyer and help you maximise your return whilst minimising your post completion obligations.

There are a few simple questions you can ask yourself:

  1. Are all your key contracts (with suppliers and customers) in writing and have the terms of these contracts been reviewed recently?
  2. Are all your employment contracts up to date and signed and do your records reflect this?
  3. Do you retain signed and complete copies of all the financing documents for the business? (e.g. banking documents, hire purchase agreements etc)
  4. Do you have an accurate record of the assets of the business with current valuations?
  5. Are the properties used by the business subject to documented leases/licences?
  6. Are the intellectual property rights used by the business protected? (e.g. do you own the website used by the business?)

If you have answered no to one or more of these questions, you should take action to rectify the issues as soon as possible.

During the review of a business, the buyer and their advisors will identify areas of risk and they will be likely to want to renegotiate the terms of the deal (i.e. reduce the purchase price and/or increase your potential liabilities through warranties and indemnities).

In addition, whilst it is hard to think about yourself when you are immersed in running a business, as a seller, you should also think about your own position. You should review your tax position with tax advisors to reduce potential liabilities on disposal of the business. Advice may suggest restructuring of shareholdings or a review of the purchase price payment mechanics.

It can never be too early to prepare your business for a possible sale, but you can be too late.

 

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