The Company Commercial team at Neves Solicitors offer five essential pieces of advice to anyone considering selling their business.
Main picture: Meet the Company Commercial team at Neves Solicitors, (from left) Jessica Williams – paralegal; Stewart Matthews – managing partner and head of company and commercial; Kim Sayer – associate; Simon Porter – senior associate
Preparation and planning in good time
As a business owner, you will want to maximise the value realised and minimise your tax bill. Planning should be started as early as possible to groom the business for sale and hence maximise the valuation. Also, the business structure may need to be reorganised to ensure maximum tax efficiency (for example, if the assets include cash/profit surpluses and/or a business property).
The process can take several months at least (and possibly much longer if you are not prepared). As the mantra says, if you fail to prepare then prepare to fail!
Appoint your professional team
It is important that you appoint a team of experienced and trusted professional advisers at an early stage. Your IFA, accountant and solicitor should be consulted on all major decisions affecting your finances and assets, including advising on the sale itself and the post-sale planning. You should also have in place a strong management team prior to the sale.
The sale process will take up a lot of your time so you will need others to run the business in the interim and this is also a good selling point for the buyer.
Find the right buyer
It can be harder than you think to find a suitable buyer for your business. You first need to consider what your future plans are for yourself (for example, retirement) and your business (for example, leaving the business in good hands for future growth).
Passing on your legacy to the right person is a key concern for most business owners. Your plans will then help to identify the type of buyer you are looking for. Examples include a trade/strategic buyer (someone who has a similar business and, by buying your business, will be able to move their business to the next stage), a financial buyer (a professional investor who is buying with a view to making a profit and may require you to continue to run the business for a period after sale) or an operational buyer (a person running an established and successful business – perhaps senior employees in your own business – who want to be their own boss and earn a decent income).
You can then consider engaging a professional adviser to help you market your business and find the type of buyer you are looking for – be careful to check their terms of business so the agreed fee structure is sufficiently incentivised (such as a success fee on sale). Your existing professional advisers (IFA, accountant and solicitor) may also be able to help in finding a buyer.
Get the right deal
Business sales take a variety of forms and a big decision that needs to be made at the outset is whether to proceed by way of an asset sale or a share sale. In an asset sale, you sell only those assets you want to sell (or the buyer wants to buy) and you are left to deal with the liabilities that are left behind. Going down the share sale route allows you to sell your business as a whole including all assets and liabilities.
There are also many different types of sale consideration, such as cash, deferred consideration, shares in the buying company and loan notes. There are distinct tax advantages and disadvantages to these structures, so it is critical that advice is taken before making a final decision.
Understand the process
You are likely to sell your business only once in a lifetime and it can be a time consuming and stressful experience. It is largely a buyer-driven process and this can be managed with the support of a good professional team. Having a lead negotiator by your side from the start will help to manage relationships with the buyer and its advisers.
Neves Solicitors Company Commercial Team
The Company Commercial team of experts at Neves Solicitors have many years of experience in a broad range of company/commercial matters, ranging from company sales and acquisitions, investment, fundraising and lending agreements, corporate reorganisations, shareholder protection, employee incentives and options (including EMI options), franchise agreements, management agreements and partnership matters to assisting schools convert to academies and join multi-academy trusts (MATs). Neves also assist a number of clients with wider ranging commercial documents including IT/Software licences/agreements, general commercial agreements and commercial property related documentation.