If you are thinking of selling your business or if you think you are ready to sell your business then please read on…
Time and time again we speak to clients that have ‘done the deal’ so to speak and instruct us when they panic on receipt of due diligence enquires. The volume and extent of due diligence enquiries causes them concern as they are simply not prepared for it and did not envisage this aspect as part of the deal.
Preparation is key. In order to prepare to sell your business you need to start preparing early on. This will give you peace of mind through the transaction and, of course, post-sale.
Areas you need to consider and address include but are not limited to the following:
Preparation – Getting all your records in order. Records relating to Tax, NI, Corporation Tax, VAT etc, Companies House, the Information Commissioner and any other relevant bodies.
Valuation -Â SeeÂ our article onÂ valuing your business and the value of a business . Is there anything that you can do to increase the value of the business?
Accounting/Tax Advice – It is crucial you take advice so that you fully understand what will work out best for you- asset sale/ purchase or share sale/ purchase. Often accountants and tax advisors can model figures for you to show you the net result for you taking in to account given variables.
Buyers – Do you have a buyer or a pool of buyers? Having a number of potential buyers interested is, of course, ideal because you can create competition between them. You may have a preference with a particular buyer in terms of their strategic fit with your business or the fact that you will have to work with them post completion for a period of time. Once you have a buyer on board you need to plan what is key to you and negotiate on those points.
Business Agents – They can either be a God send or a nightmare. Do check the terms with them carefully and go by recommendations and not hard-selling agents who attempt to pressure you into signing a contract with them. A good agent can help to market your business well and potentially identify a pool of buyers, as well as makingapproaches to them.
Confidentiality and Non Disclosure Agreements – Before anything confidential is discussed it is always sensible to put in place an NDA. This will offer you a layer of protection and ensure that confidential matters relating to your business are not discussed openly without restriction. It is also sensible to include post-termination provisions in order to prevent future disclosures.
Due Diligence – This is a fact find exercise on the part of the buyer. The buyer will undertake due diligenceÂ (investigations) on all key aspects of the business so that it can get a better understanding of the business and identify areas of comfort and concern.
Sale/Purchase Agreement – The sale or purchase agreement will set out all the terms of the transaction between the parties. This is usually drafted by the buyer’s solicitor with input from the seller’s solicitor. The agreement is often voluminous concerning lots of areas the buyer and seller have thought of and other areas the lawyers think are prudent to address.Â
By Izaz Ali (Izaz.Ali@lawdit.co.uk). Izaz is a commercial lawyer who specialises in information technology law and intellectual property law with an emphasis on IT, escrow, online and off-line contracts, and the buying and selling of online businesses.