Business Law: Clare Richards on how to prepare your business for sale
PUBLISHED: 17:17 12 September 2017 | UPDATED: 16:41 14 September 2017
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If you are a business owner, there will almost certainly come a time when you want to exit from the business. A sale often results in the best financial return.
Finding a buyer isn’t always easy and then the sale process itself can present many challenges.
However, there are steps that you can take in advance to maximise the chance of a successful sale at a good price.
You should try to think about the business the way a buyer might. A buyer will investigate the business (due diligence) to try to identify problems.
If there are any, the buyer might want a price reduction or even walk away. Therefore, if you can anticipate problems and sort them out in advance, you may well improve your position in the long run. Things to consider include:
•Does the business have all the licences and permissions that it needs? Are they all in the right name? Sometimes, the owner of a trading company, not the company itself, holds the licences. This can normally be changed as required, but might take some time to organise;
•Does the business comply with all legal requirements? If not, the sooner this is sorted out the better;
Do employment contracts properly set out the current terms and conditions of employees? If not, you should take professional advice about how to deal with any discrepancies;
•Does the business actually own its assets? For example, if the business relies on intellectual property rights (IPR), is it clear that the ownership of the IPR is in the business and has been protected as appropriate?
•Does the business keep a proper record of complaints and problems? How are complaints handled? In some sectors (hospitality is an example), complaints are inevitable and it is the manner in which a complaint is handled that will be of most interest to the buyer;
•Is the business generally well managed financially? Annual accounts should, of course, be produced on time, but you might want to go further than this. A buyer will often ask to see the business’s monthly management accounts and current budget. If you do not already produce these, it might be sensible to start doing so.
At Barker Gotelee we can advise on these and the other legal issues that arise on the sale of a business.
Clare Richards is a partner and specialist in corporate law at Barker Gotelee.