Preparing Your Business for Sale
Preparation can influence the value achieved, the buyer’s confidence and the speed at which a transaction progresses.
Potential buyers will usually investigate the company’s financial position, ownership, contractual commitments, employment arrangements and legal compliance.
Issues identified late in the process can lead to price reductions, additional contractual protections or delays.
We assist sellers with preparing for legal due diligence by identifying matters that may need attention before the business is marketed or a preferred buyer is selected.
This may involve reviewing:
- Corporate records and shareholder arrangements
- Material customer and supplier contracts
- Intellectual property ownership
- Employment contracts and incentive arrangements
- Property documentation
- Existing disputes and contingent liabilities
- Regulatory and compliance matters
- Restrictions affecting the proposed sale
Addressing significant issues early can strengthen the seller’s negotiating position and reduce uncertainty during the transaction.
Negotiating the Sale Price and Payment Terms
The headline purchase price is only one element of a sale agreement.
Sellers also need to consider when the consideration will be received, what adjustments may apply and whether any payments depend on future events.
Our lawyers advise on:
- Fixed purchase prices and completion adjustments
- Locked box pricing mechanisms
- Completion accounts
- Deferred consideration
- Earn out arrangements
- Retentions and escrow arrangements
- Buyer security and payment obligations
- Restrictive covenants and post-sale commitments
Deferred consideration and earn outs require particular care.
Where payments depend on future business performance, disagreements can arise over accounting policies, management decisions and the calculation of financial targets.
We focus on negotiating clear contractual provisions that reduce uncertainty and protect the seller’s entitlement to payment.
Managing Buyer Due Diligence and Disclosure
Buyer due diligence can be one of the most demanding stages of a company sale.
The seller may need to provide extensive documentation, respond to detailed enquiries and address concerns about historical liabilities.
Our business and company sales lawyers help coordinate the legal aspects of this process, working with management teams and other advisers to provide accurate information efficiently.
We also advise on disclosure letters and the negotiation of warranties and indemnities.
These provisions can have important consequences after completion, particularly where a buyer subsequently alleges that information provided during the sale was inaccurate or incomplete.
Our objective is to ensure that the seller understands the obligations being accepted and that liability is appropriately limited.
Selling a Business to an Overseas Buyer
International buyers can provide valuable exit opportunities for UK business owners.
However, a cross-border sale may involve different approaches to due diligence, transaction documentation, financing and completion.
We advise UK businesses and shareholders selling to overseas purchasers, as well as international corporate groups disposing of UK subsidiaries or assets.
Our experience includes advising a European internet services business on the US$36 million sale of assets to a UK AIM-listed company.
International transactions may require coordination between legal advisers in different jurisdictions, particularly where the business has overseas subsidiaries, employees, contracts or intellectual property.
We manage the UK legal aspects and work alongside overseas advisers where required, helping sellers maintain control of the transaction and understand the implications of the proposed arrangements.
Protecting Your Position After Completion
For many sellers, the objective is to realise the value of their investment and move on without unnecessary continuing exposure.
However, sale agreements may impose obligations that continue after completion.
These can include warranty claims, indemnities, restrictive covenants, transitional services, earn out arrangements and obligations to assist with the transfer of business operations.
Where founders or senior managers remain involved, their future employment, consultancy or shareholder arrangements also need careful consideration.
Our lawyers negotiate these provisions with the seller’s wider objectives in mind.
We aim to minimise avoidable liabilities and ensure that continuing commitments are clearly defined, proportionate and commercially workable.