LEGAL
A guide to selling your business
There are many factors to consider when selling a business and it isn’t something that should be entered into lightly. Whatever the rationale, selling your business can be a very emotional and stressful time. Commercial law expert Andrew Fielder (pictured), from Banner Jones, gives his advice on how to ensure the process goes as smoothly as possible.
CONSIDER WHY YOU WANT TO SELL: One of the first things any adviser will ask is why you want to sell, which lays the foundations of the type of deal structure that is proposed. A trade sale to another business in the same sector
is the most common exit route, although alternatives can include a management buy-out, passing the business to your family or floating your business. Some of the more common objectives include
retirement, to secure the future of the business and the employees, or to minimise personal tax liabilities.
STRENGTHEN YOUR OFFERING: Prior to selling, we would advise you to: • Create a stable financial plan for the year, delaying any major purchases to help achieve this
• Sell off any redundant equipment and property • Tighten up stock control, making provision for old stock as appropriate
• Take pride in the appearance of premises by ensuring they look well maintained and tidy
SEEK RELEVANT SPECIALIST ADVICE: There are a number of factors to take into consideration during the selling process that you will need to keep front of mind to ensure you are compliant. A commercial solicitor will offer guidance from the
initial ‘sales memorandum’ through to dealing with the buyer’s solicitors once an offer is accepted. A corporate financial adviser will be able to manage all matters relating to tax, and, if you have employees, you may also want to seek advice from an employment solicitor to ensure their interests are protected.
TIMINGS: The biggest mistake business owners often make is offloading the business too early, rather than taking the time to ‘groom’ the business prior to the sale. Similarly, business owners have been known to panic
and sell to the first bidder when the market is in decline rather than waiting it out. In either case, legal advice is advised to notify you of
the implications of both. More often than not, by taking your time, you can present your business in a very different way and therefore maximise the sale value.
MANAGE YOUR NUMBER ONE ASSET: One of the legal requirements is to be clear about what happens to your employees in the early stages. You will no doubt want to quash any potential concerns they may have before any on-site meetings/tours begin taking place. In the case of a share sale, your employees will
remain with the business and the buyer will inherit the control over your employees. They will be transferred to the new buyer through the TUPE process and an employment law solicitor can guide you through this.
52 business network May 2017
When selling a business, be as transparent as possible
In the situation where the buyer may state they do not
wish to take a share sale, all or some of your employees may leave and terminate their employment with you. In such a case you must tread very carefully as you may be left with liability for claims arising from their dismissals, so legal advice throughout the process will be key.
WEIGHING UP THE OFFERS: There are different ways to fund the purchase and take over of a business, and this may affect how you draw up a shortlist of potential buyers. Offers may include cash payments, guaranteed
deferred cash payments or share swaps or payments can be linked to future business performance in the form of ‘earn-outs’. As a front runner emerges, your lawyer will draft up a
‘Head of Terms Agreement’ which will include the main points of the deal including what the purchaser is offering to buy, how the price will be calculated and the agreed payment terms. At this stage, other interested buyers are kept in reserve while you try to finalise the deal.
FINALISATION: Before committing, the purchaser will want to carry out due diligence checks in to every aspect of your business. You will probably be contacted by the buyer’s lawyers and accountants, who will want to see your accounts, supplier contracts, employee contracts, property deeds, warranties, indemnities and so on. You should be as transparent as possible. Above all,
you need to be able to show prospective buyers that your business is under control with accurate management information. There is no denying that selling your business can be
extremely time consuming, but if you invest the time wisely and have a team of suitable advisers on your side then you should find that the process runs smoothly, and the outcome is what you want.
‘If you have employees, you may also want to seek advice from an employment solicitor to ensure their interests are protected’
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