How do I sell my Business?
For most business owners, the thought of selling the business which they have spent many years and great effort building is a daunting one. With the right advice however, it doesn't have to be.
It may be that you have found a buyer for your business, agreed the price to be paid and the main terms on which the sale will take place. Alternatively, you may have recently come to the decision that you want to sell, but you don't know what to do next. Either way, we can assist you in selling your business.
Set out below is a brief outline of the key stages in the sale process which you can expect to encounter if you decide to sell your business.
Share or asset sale
The first thing you need to decide is whether you want to sell just the assets of your business, or (if you run your business as a limited company) whether you want to sell all of your shares in the company.
If assets are to be sold, the buyer will only purchase the assets (and liabilities) which it agrees to purchase, and you will be left with the remainder. If shares are to be sold, the buyer purchases all the assets, liabilities and obligations of the business and you will not retain anything.
A number of factors may influence this decision, and it is important that an informed decision is made so that the sale produces the best outcome for you. We recommend that you take tax advice as the structure of any sale will have tax implications for you.
Getting prepared
Collecting information
Once the heads of terms are agreed and signed, the buyer will want to commence its 'due diligence' or information gathering exercise in respect of your business. The aim of the buyer in carrying out this exercise is to find out as much information as possible about the company/business it proposes to purchase. For example, the buyer will ask you for information and documentation in respect of your employees, properties, stock, equipment, contracts and intellectual property.
If you are concerned about disclosing such information to the buyer, you should consider asking the buyer to sign a confidentiality, or non-disclosure, agreement. This would require the buyer to keep all information which you disclose to it in the course of a transaction confidential and to use that information only for the particular purpose for which it is disclosed.
At this stage, you may also be asked by the buyer to sign an exclusively or lock-out agreement. This agreement would require you to negotiate solely with the buyer for a specified period of time. The aim of such an agreement is to give the buyer some protection against another party outbidding him while he is spending time and money investigating your business and getting the paperwork together.
Timing and approvals
A variety of consents and approvals are likely to be required before the sale can take place. In particular, if you are selling assets, as each individual asset will need to be transferred. For example, if your company/business occupies premises under a lease, consent from your landlord will be required before you can transfer the lease to the buyer. There may also be a premises licence or business registration to organise before the purchase can take place.
Sale and purchase agreement
As due diligence progresses, and while you await the necessary consents and approvals, focus turns to the drafting and negotiation of the Sale and Purchase Agreement. This is the key document dealing with the transfer of your shares or the assets of the business to the buyer.
The content of the agreement will depend greatly on whether shares or assets are being sold. Whatever you are selling the Agreement will, for example, contain clauses dealing with: the purchase price, what it is that is being sold, warranties (promises in relation to the company/business, the breach of which may give rise to a claim for damages) and restrictive covenants (limiting the seller's competitive activities after the sale)
Disclosure letter
The disclosure letter will be produced by you and your advisers and operates to limit the warranties given in the sale and purchase agreement. For example, if there is a warranty which says the company/business is not involved in any litigation, when in fact it is, this should be disclosed in the disclosure letter together with supporting documentation. Carefully worded disclosures should prevent you being in breach of a warranty.
Completion
Once the due diligence process has been completed, approvals and consents have been granted and the documentation has been agreed, the sale of your business can be completed. Documentation is signed by both parties, purchase monies are paid, and you can take a well earned break.
For a confidential, no obligation discussion about the sale of your company or business, please email or call Mike Watson on 023 8082 0546.
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