Considering Selling your Business?

selling your business


Many people are now winding down a little to enjoy a summer break. For business owners this can be a period of reflection and a time when major decisions are made. For some this might mean that they conclude that now is an appropriate time to consider selling their business.

Many business owners may only sell one or two businesses in their career and as such the following short guide may be useful.

Do I have something worth selling?

This may seem an obvious point to make but sometimes it makes sense to stand back from the business and consider why someone might want to buy your business? Placing yourself in a buyers shoes can also help you identify some of the questions, considerations and concerns they might have. Some businesses are intertwined with the owner, whether that is the branding or the operational implementation of products / services so this will need to be considered from a buyer perspective. Having considered these factors owners will have a better idea of who might consider buying their business.

Preparing a business for sale

Prior to going to market with a business it is worth considering the issues that might be identified during the due diligence process. The potential list here is long but could include; ownership of intellectual property such as brands, products or even data. Contractual agreements with customers and vital suppliers will be of interest to a buyer and if these are not formalised the perceived risk will be higher. Especially in this tight employment market, contracts of employment will be a consideration, so these are well worth a check to ensure they are current and appropriate for the roles people are performing.

From a legal perspective drafting a non-disclosure agreement at the outset will help when communicating with potential buyers and the professionals who may become involved in the sales process.

Financial information

Potential buyers will of course carry out a thorough financial review of a potential acquisition. As such it would be wise to not only supply statutory returns but also provide an interim trading statement. Not all buyers will be put off by a period of relatively poor trading assuming a justification can be made and that proven remedial action has been taken. Some may also see a synergy in adding a businesses to an existing business and as such the sum of the two parts its greater than the units in isolation. Information on any lending, property or longer term financial agreements will need to be disclosed.

Valuing a business

This is a notoriously difficult thing to do. There are many factors at play here ranging from the uniqueness of the business, the sector in which it operates, its financial position, its customer base and so on. Inevitably there are substantial variations across different businesses – so being tied to any valuation formula is probably unwise. If you work with a specialised business sales advisor they may be able  to provide sector information based on their recent transactions but even this will be a guide. The value of a business is, largely speaking, that which a potential buyer is willing to pay.

How long does it take?

Again this varies business to business but owners should anticipate a period of discussions, some of which may come to nothing, and even where interest is expressed there could be a few due diligence exercises before an offer is tabled. As such owners considering an exit should build in a reasonable period of time to achieve their objective.

The above can only be a brief overview of some of the issues. Business owners considering a divestment or an acquisition should contact us sooner rather than later so we can advise upon the legal aspects of a sale.

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