Merton Solicitors

BUSINESS SALE FAQS – MERTON SOLICITORS

How do I get my business valued?

You should make sure you have a range of specialist advisors on board, including finance advisers, accountants and solicitors.  You can get a general idea of the value of your business by consulting them or using the services of a professional valuer. However, bear in mind that at the end of the day, your business is ultimately worth what the buyer is prepared to pay and shrewd negotiation will emphasise the market value of your business and the aspects of the business that are particularly valuable to the buyer to ensure you get the best price possible.

Do I need to give indemnities and warranties when selling my business?

Buyers will typically demand indemnities and warranties regarding commercial, legal and financial aspects that they cannot be absolutely certain are true.  For example, you might have to give a warranty stating that your business is not currently involved in a commercial dispute or court proceedings.

Warranties are generally quite broad whilst indemnities often relate to more specific things.  If, for example, it turns out that your business is involved in a business dispute, you may be required to indemnify the purchaser.

Who should I seek advice from?

You generally need three advisors: a corporate finance adviser to help you get your business ready for sale, attract buyers and market the sale; a solicitor to draft and negotiate agreements and get the business legally prepared for sale and a tax specialist (either solicitor or account) to help you minimise your tax liabilities.

How do I market the business and the sale?

Work with your advisors and see what they can do for you.  As a starting point, you should get a list of possible buyers and narrow it down.  You will need a sales memorandum which markets the business and is sent out to possible buyers.  Prior to sending the sales memorandum, you can have the recipient sign a confidentiality agreement so the sale and details of it are not made public.

What do you mean by ‘heads of terms’?

Heads of terms are a type of agreement which includes the main points of the sale and are typically used after all the main negotiations have finished.  However, there nature can vary and it could be the case that an agreement is signed based on points that have to be negotiated.  These agreements can be legally binding, and you can agree to a period of exclusivity and request that a deposit or legal fees are payable in the event the purchase is not completed.

What is due diligence and what role does the seller play in it?

Due diligence is a process that is carried out by the buyer and is used to check and verify key financial and legal aspects of the business, the nature of the seller’s title to the business etc.  The seller’s role is to simply make sure documents are made available as and when needed and keep a record of what documentation the buyer has requested and when.  To speed up the sale, you could also carry out your own due diligence to address any areas of concern that the buyer will pick up on doing his own due diligence.

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