Considerations before selling your business

Before selling a business, it is important to consider a number of factors to ensure that the process takes place in an orderly and efficient manner, whilst minimising any potential future risks on the part of the sellers.

Here are some of the key points to be considered early in the sale process:

1. There are a variety of ways in which a buyer and a seller can come together to agree a deal. A direct approach from a buyer is not uncommon, particularly if the buyer is in the same sector. Alternatively, shareholders may appoint a corporate finance advisor to market the business for sale and liaise with potential buyers. As well as marketing the business, it is also the role of the corporate finance adviser to prepare a business for sale, with a view to maximising the sale price.
2. When valuing a business, there is no fixed method of valuation which applies in all circumstances. At its most simple, a value can be arrived at as a result of a straightforward deal between two parties, based on what the buyer is prepared to pay, and the sellers are prepared to accept. A more sophisticated buyer will typically base its offer on a valuation calculated by reference to a multiple of the profits of the target business, after deduction of certain expenses, including tax.
3. A sale of a business, whether it be by way of a sale of shares or a sale by a company of its business and assets can have significant tax implications. It is important to involve tax advisers from the early stages of the sale process to ensure that the transaction proceeds in a manner which is as tax efficient for the sellers as possible. The tax advisers should also advise as to the availability of any tax reliefs, including entrepreneurs’ relief.
4. Given that the buyer will generally be paying a substantial amount for the acquisition of the target business, it will usually want to conduct an extensive due diligence exercise in relation to the affairs of the target business. It is therefore important to ensure that the business' affairs are in good order before beginning the sale process. For example, locating all important documentation, including the company's statutory registers. Having all information readily available will ensure that this process proceeds as quickly and as smoothly as possible.

If you are considering selling your business, please contact a member of our Company and Commercial Law team by email at info@ramsdens.co.uk or call 01484 821 500.