The most important point for any business to understand, whether buying or selling, is that this is almost always a one shot deal. Quite simply, the cost of the right professional advice is a lot less than the cost of a poorly done deal, or a poorly planned transaction.
As you would expect, selling a business is complicated and is a blend of selling, negotiation, legal, tax, commercial planning and project management. All of these skills are needed to give yourself the best chance of achieving the best price.
Our team can help you get the result that you are looking for and below are some key steps that can help:
- Preparing for a sale
- Initial discussions
- Heads of Agreement
- Tax Planning
- Information provision and due diligence
- Draft contracts
- Final negotiations
Overall, the key is to get professionals involved early, and recognise that doing the right deal is more important than a quick one.
If you want to find out more about what is involved in each of these steps then you can do below:
Preparing for a sale
Like selling a house, you tidy up, paint the walls, put on the fresh smelling coffee before someone looks around. Selling your business is no different. We can undertake preliminary due diligence to identify what a buyer could find and put it right or be ready before they raise it. We can then work with you over a period before sale to present the business in the best possible light.
Don’t give away too much information too soon, make sure you have confidentiality agreements in place, and be prepared. What are critical “deal breaker” points and what price do you want and what is your minimum. We can help keep you honest to these. Having multiple suitors and negotiating in small steps to a point of agreement can help keep the price high.
Heads of Agreement.
A simple (often 1 page) document that just clarifies the understanding of both sides as to what the deal is. It is not binding, but make sure it is complete on key issues as this document can avoid wasting time trying to do a deal when the two sides actually don’t agree.
It is important to know the tax implications of any deal at the start and the likely tax costs as planning can then be agreed early on with the purchaser to minimise your tax liabilities.
Information Provisions and Due diligence.
A process where the buyer, or usually his accountants and lawyers go through the business with a fine tooth comb to see if it is worth what the seller says it is. This is often where the key issues over the final price are raised. As a seller you should be extremely well prepared to answer any questions and defend any negative comments. A key area for advisors is to try and be sure that there are no “skeletons in the closet”.
Based on the outcome of due diligence work, there will almost certainly be further negotiation over the price or terms of the deal. Many business owners are ground down in this process, and feel battered and bruised by the criticism of their business. The end result is that they sell for much less than they would ever have expected. Don’t let that be you.
Based on the renegotiated deal, paperwork is produced in the form of the final contracts that will be signed. You should seek to control this if you can. If it is a contract drawn up in your favour, where the other side must challenge and amend your document, you are likely to get a better result than if your lawyers are chipping away at their draft. The downside is that this may be more costly for you.
The draft contracts will need to be fine tuned, usually over the detail of the clauses and matters called “warranties and indemnities”. These are the clauses that protect the buyer if he has not been told the full facts of the business before signing. I.e. allowing the buyer to withhold some of the proceeds or to go back and ask for some money to be returned.