In recent articles we’ve covered a lot of detail on what’s involved when you decide it’s the right time to sell your business, there is a lot of information to understand. Undeniably, selling a business can be complex and so to help you better understand what’s involved, we’ve broken down the process into the 6 steps to sell your business.
Buying and selling businesses is a specialism at Jamieson Law, we have deep expertise and experience in taking the complex and making it understandable with clear, straightforward, and friendly legal advice so lets take a look at each stage.
Step 1. Preparation is key
Evaluate your business: Before you start the sales process, it’s crucial to have a clear understanding of your business’s worth. Conduct a thorough evaluation, considering factors like financial performance, market position, and growth potential. To learn more about how to value your business, you can read this article for more information.
Get your finances in order: This is an obvious one but it’s worthwhile calling out. Prospective buyers are looking for the opportunities and risks and that means they’ll want to see your financial records. By working with an accountant or bookkeeper, make sure your accounts are up-to-date, and all financial statements, tax returns, and relevant documents are in order. This transparency will build trust with potential buyers.
Legal readiness: Are your legal ducks in a row? Now is the time to review all legal documents and if they don’t exist, have them drafted to that your business is protected. Resolving any outstanding legal issues beforehand can prevent delays in the sale process. This is a vital part of due diligence (more detail below) which you can learn more about here.
Step 2. Finding a buyer
Confidential marketing: In the early stages of a discussion, it going to be important to maintain confidentiality and avoid unsettling employees, customers, and suppliers. Often the support of a business broker or M&A advisor can help market your business discreetly, find potential buyers and get conversations off the ground.
Screening potential buyers: Not all interested parties will be suitable buyers, it’s important to consider if your businesses are a good fit. Screen potential buyers to ensure they have the financial capacity and genuine interest to proceed with the purchase. Make sure that you have a non-disclosure agreement (NDA) in place to protect sensitive information.
Step 3. Negotiating terms
Initial discussions: Engage in preliminary discussions with interested buyers. You may be having more than one conversation with different buyers. These discussions will cover basic terms, price expectations, and the buyer’s plans for the business. This is also the stage where you gauge the buyer’s seriousness and compatibility.
Letter of Intent (LOI): Once a potential buyer expresses serious interest, they will submit a Letter of Intent. The LOI outlines the proposed terms of the sale, including price, payment terms, and any conditions which may include a requirement for you to remain in the business for a period of time. It’s not legally binding but serves as a framework for the negotiations and is a helping starting point for negotiations.
Step 4. Due diligence
Providing information: The buyer will conduct due diligence to verify the information you provided. They may bring in experts from their own legal and accountancy teams and so you should expect a thorough review of your financial records, legal documents, operations, and other critical aspects of your business.
Cooperating with buyers: This stage is often lengthy and can involve a lot of back and forth as questions are asked and clarity is sought by the buyer. It’s a good idea to set aside enough time to answer questions and provide additional documentation as requested. Transparency and cooperation during this phase are vital to maintaining the buyer’s confidence and ensuring a smooth process.
Read more about due diligence and what’s involved here.
Step 5. Finalising the deal
Negotiating the purchase agreement: Once due diligence is complete, the terms of the sale will be negotiated in detail. This includes the final sale price, payment structure, warranties, indemnities, and any other conditions of the sale. Working with a lawyer to make sense of the agreement and to ensure that you are properly protected once the sale is completed can provide reassurance and peace of mind.
Drafting legal documents: Either your legal team or the buyers legal team will draft the Sale and Purchase Agreement (SPA) and any other necessary legal documents for the sale to complete. These documents will outline the terms you’ve both previously agreed upon and the responsibilities of both parties.
Step 6. Closing the sale (and celebrating!)
Signing the agreement: You’ve completed the due diligence, you’ve agreed the terms of the sale and all legal documents have been drafted. Now it’s time to sign. This is the formal agreement that legally transfers ownership of the business.
Transferring ownership: The next stage can often be overlooked in the excitement of the signing the sales agreement – the final, vital step involves the actual transfer of ownership. This includes transferring assets, updating legal registrations, notifying stakeholders, and transitioning management if necessary. This is usually best handled by a lawyer who can ensure all aspects involved in the sale are properly transferred. NB: Asset sales and share sales differ so you might want to read more on those here.
Receiving payment: Ensure that the payment is received as per the agreed terms. This could involve an upfront payment, installments, or other structured payments as negotiated. Now crack open the bubbles to celebrate!
Ready to sell your business?
If you’re ready to sell your business, give Jamieson Law a call. We specialise in guiding entrepreneurs through these complex transactions, making sure that you have the legal and commercial advice you need for a successful sale.
Contact us today at 03308 184 218 or fill out our contact form here to discuss your business needs.
