Selling a business: Getting started
Selling a business can be expensive, complicated and time-consuming, and may also have significant tax implications, so you need to plan carefully and get the right advice at an early stage. In this series of briefings, we will explain the full process of how to sell your business.
Once you begin to think about selling, you need to get an idea of the value of the business and what price a buyer may be prepared to pay. Alternatively, if you have already received an offer, you need to decide if it is high enough. Sellers are often surprised at how much – or little – their business is worth. Your accountant can help with this, but you may also want to consult a valuer, broker or other business consultant. Finding a buyer: most importantly, the sale obviously cannot happen unless you can find someone willing to buy the business. Often the buyer will be someone who has already dealt with the business – for example, a competitor, supplier or distributor. Alternatively, buyers can be found through personal contacts, brokers, advertisements in the trade press, or websites offering businesses for sale.
Finding a buyer
Most importantly, the sale obviously cannot happen unless you can find someone willing to buy the business. Often the buyer will be someone who has already dealt with the business – for example, a competitor, supplier or distributor. Alternatively, buyers can be found through personal contacts, brokers, advertisements in the trade press, or websites offering businesses for sale.
The next step is to consider the most tax-efficient structure for the sale, as discussed above. Aside from tax planning, you may need to prepare the business for sale. This preparation could involve anything from simply getting your paperwork in order to carrying out a full-scale restructuring of the business.
For example, if you are selling part of your business, you may want to transfer the assets of that part of the business into a new company and then to sell the shares in that company. Other pre-sale restructuring could include paying a dividend to remove cash from the company prior to sale, or capitalising an inter-group debt owed by the company to the selling parent to reduce the liabilities of the company.
Alternatively, existing loan stock in the company may need to be converted into shares, and share options may need to be exercised to subscribe for shares, which will then be sold to the buyer – assuming that the sale price is higher than the conversion price of the loan stock and the exercise price of the options. Any pre-sale restructuring will need to be carefully planned in good time for the sale.
Preparing your paperwork
You should also anticipate that the buyer will carry out a detailed investigation of the business. Preparing for this exercise in advance can have two benefits: first, if you can deal with the buyer’s enquiries quickly and efficiently the business will appear more professional and well-organised; secondly, the more you prepare in advance, the less the sale process will distract you from running the business while you retain ownership.
The buyer will probably want to carry out a brief investigation at the outset, to value the business and agree a price. The valuation will cover such things as premises, equipment, stock, debtors, creditors, and goodwill. Make sure you do not give the buyer any information about the business until it has agreed to keep the information confidential.
As a practical matter, don’t underestimate the amount of management time involved in the sale process. You will need to be able to effectively manage the business at the same time, just in case the sale falls through and you are left continuing to own the business.
Click here to read the full briefing series: Selling a business.
For more information or guidance, please get in touch with:
Partner and Head of M&A
T. 020 7227 7441
This briefing is for guidance purposes only. RadcliffesLeBrasseur accepts no responsibility or liability whatsoever for any action taken or not taken in relation to this note and recommends that appropriate legal advice be taken having regard to a client's own particular circumstances.