Understanding the different stages of the business sale process
Selling a business in the UK involves a series of steps and key milestones. The process demands careful preparation, and a business sale ‘checklist’ is a useful tool that keep sellers on-track.
It’s advisable to begin business sale planning as early as possible, and allow plenty of time to improve the ‘nuts and bolts’ of a business where necessary. This might involve adopting new technologies, for instance, or perhaps updating contracts.
What’s included in a business sale checklist?
- Articulating the reasons for sale
Buyers will want to know why the business is for sale. It might be due to retirement or ill health, for example, but failing to provide a clear reason for sale can raise suspicions and create a challenging environment in which to sell a business.
- Leases and contracts
When do leases expire, and are all customer, supplier, and employment contracts in order? If a customer or supplier contract has been in place for years, it may need updating and signing again.
- Professional assistance
Business sales brokers provide invaluable support, and can smooth out the complexities inherent in the sale process. Professional accountancy and legal assistance also ensures that figures and information provided to potential buyers is accurate and can be relied upon.
- Comprehensive audit of business systems
A complete audit of systems and procedures highlights areas for improvement, and helps to present a business in its best light. It allows the business to reach its full potential in terms of trading and market value when it comes to selling.
- All required documentation
Prospective buyers will need to view financial and commercial documents, including statutory accounts, insurance policies, and leases/contracts. It’s important to gather together all the necessary paperwork, and present it logically to potential purchasers.
- Sales Memorandum
This is the first document to be distributed. It’s typically preceded by a confidentiality agreement that needs to be signed by the interested party. A Sales Memorandum outlines the reasons for sale, and includes financial data and general information about the business.
- Heads of Terms
A Heads of Terms agreement, also known as a Letter of Intent, details the results of negotiations and denotes the intent of the buyer and seller.
- Sale Agreement
This is the final legal document and covers all elements of the sale, including assets and liabilities, and any warranties and indemnities that have been negotiated.
A checklist for selling a business
Selling a business is a complex procedure and a ‘to-do’ list such as this helps with organisation, preparation, and the sale itself. It keeps a seller on-track with the tasks they need to carry out, and improvements that can considerably increase a business’ market value.
If you want to know more about selling a UK business, please go to Ernest Wilson on Practice Portfolio.