At some point or another, a time will come whereby a business owner will wish to sell or dispose of their company. However, whether moving on to pastures new or simply looking to shut-up shop, the business sale process poses a number of challenges – which is why it is wise to seek specialist advice.
The first step business owners ought to consider is seeking an accurate valuation of the business. By examining the local property market carefully beforehand, directors can ensure that the subsequent sale is best focused on achieving a reasonable price.
“While it is often hard to admit, a business is only worth what a purchaser is prepared to pay for it and sellers shouldn’t go in with inflated visions of the business’ value,” said Matthew Johnson, Associate Solicitor with Palmers.
“When looking to sell, you and your advisers should have an idea of how much you think the business is worth – but you should not reveal this to potential purchasers,” he said.
Once a price has been decided, it is then important that the business is properly marketed.
At this stage, business owners may receive enquiries from customers and suppliers, while competitors may also want to make use of confidential information released as part of a sales package.
Due to this, it pays to draft up a confidentiality agreement for potential buyers to ensure commercially sensitive information isn’t shared with a competitor, Matthew said.
Once a buyer emerges, it is then crucial that the business owner performs the necessary due diligence to ensure the financial and legal requirements are in place.
At this point, it is worth creating a ‘heads of terms’ – a legally-binding agreement through which the seller can agree on the exclusivity of the deal, while also putting in place requirements for the buyer to cover their legal costs if they decide not to go through with the purchase.
“When nearing the end of the sale, you may find that the buyer requests a number of warranties and indemnities,” Matthew said.
“Do not give false warranties as the buyer may be able to sue you for any losses suffered further down the line,” he added.
The process of selling a business can be complex and confusing, which is why business owners should seek specialist legal advice. Get in touch with Palmers today to find out more.