November 2022

usiness operates with fixed contractual
arrangements with other parties – think supply,
distribution or agency agreements – are they upto-date?
Do you have signed copies of those
contracts and do they need extending? Are your
purchase and supply terms and conditions up-todate?
A buyer will want to know that they have a
solid base for the business to continue operating
once you have sold.
“It is vitally important that, before disclosing any
information (including the identity of the
business), the prospective purchaser enters into
a non-disclosure agreement (an NDA) with you
that will protect you from an unscrupulous buyer
‘raiding’ your company for confidential
information” – Matthew Catterall
• Employees. Are your employment contracts
and HR records in order? Do you have appropriate
policies and procedures in place?
• Statutory records. These include your share
certificates and corporate records. Are they in
your possession? (they could be with your
accountant) If they cannot be located, get them
written up.
• Insurance. Make sure that you are fully and
properly insured against all necessary risks, and
ensure that premiums are paid up-to-date. Can
any outstanding claims be resolved?
Taking steps to address any areas of concern –
whether big or small – will allow you to present a
business that looks neat and tidy and which is
appealing to prospective purchasers. If you have
any areas of concern that you are not confident in
dealing with, consider appointing professional
advisers early to assist with preparing your
business for sale.
Why not get their lawyers and accountants to
perform a ‘health check’ on the business so that
any issues can be dealt with?
Marketing
So now you have your house in order, how do you
find a buyer?
Generally, there are four main avenues to
consider:
• Sourcing a trade sale yourself from your
business contacts, say customers who may want
to secure their supply chain;
• Would an MBO by your other directors be
possible?
• Engaging with an experienced, independent
corporate finance adviser;
• Engaging a ‘business sales agent’.
Finding a potential buyer yourself could
potentially save on commissions, but beware of
confidentiality issues slipping out into the market,
which could affect staff morale (See: initial
discussions with prospective purchasers).
“Beware that an
indicative offer is there
to get your attention, to
flatter you and hook
you into a sale – it does
not mean that is the
price you will receive
in cash on completion”
An independent corporate finance adviser will
likely take an ‘up front’ fee to work with you to
value the business and prepare marketing
materials, with a ‘back end’ commission based
on the value achieved. The adviser will then go to
market on a confidential basis, filtering the
prospective purchasers and working with you to
achieve the best result. Their in-depth
knowledge of corporate finance will assist you in
maximising value.
The path with a business sales agent is similar to
that of a corporate finance adviser. However, in
our experience, many are less knowledgeable,
charge higher commissions and lock you into
significant exclusivity periods where a fee is
payable, even if they didn’t find you a buyer.
Initial discussions with prospective
purchasers
Once you have found a prospective buyer (or
buyers), it’s time to engage with them to further
the process. Often buyers will make indicative
offers based on limited information about your
business, but will need to firm up those offers
once they have had a chance to undertake their
due diligence exercise.
Beware that an indicative offer is there to get your
attention, to flatter you and hook you into a sale –
it does not mean that is the price you will receive
in cash on completion.
It is vitally important that, before disclosing any
information (including the identity of the
business), the prospective purchaser enters into
a non-disclosure agreement (an NDA) with you
that will protect you from an unscrupulous buyer
‘raiding’ your company for confidential
information e.g. on pricing or poaching key
employees, customers or even suppliers.
It is usual for sellers to engage lawyers at this
point to draft and agree the NDA as it’s such an
important document. Once that has been
signed off, the sale process can begin in
earnest.
Next month: The team at Taylors Solicitors will
guide you through the next steps towards
completion once you have found a buyer.
Contact Taylors Solicitors
01254 297900
www.taylors.co.uk
@taylorslawfirm
NOVEMBER 2022 TC 15