The Legal Tips for Selling Your Business

We’ve had the legal tips for setting up a business, but what about when the time comes to packing your boxes and head off to face a new challenge?

Legal Tips for Selling Your Business
Cash – provided by Shutterstock

For many, selling a business is just part and parcel of the entrepreneurial lifestyle, for others it is a much bigger decision, especially if the company in question is a family business into its 3rd generation. Both scenarios have very common features however, primarily that the seller wants to get the maximum possible price to achieve the healthiest profit.
There are a number of things you can do as the business owner before a deal takes place – below are a few tips to help achieve a successful sale.

1. Get your ‘house’ in order

A tidy business makes your company much more attractive to potential buyers than an untidy one. Planning and preparation are key to a smooth, successful sale. This won’t happen if you have a large VAT bill that is outstanding or an employment tribunal issue waiting to be heard.

Carry out an internal due diligence procedure to see what is lurking below the surface before a possible buyer’s due diligence finds it. This then gives you time to resolve any issues to ensure your sale is more efficient. You will have to make sure your accounts are organised and any staff and financial issues the business has are addressed – all these have to be dealt with before your business is put to a buyer.

Make sure that all systems and relationships are formalised. This includes effective management information systems, written contractual documentation for customers, suppliers and employees, and well maintained premises, equipment and machinery.

2. Cash is King?

Plan well ahead to make sure your business has a financial record to attract a good buyer. One large area to get organised is working capital, which can be done through reducing stock levels and getting in control of creditors. It may also be worth renegotiating supply contracts and reducing some off the cuff perks you have implemented. Perhaps you can reduce your debt by selling off equipment that is underused.

Good sales forecasts will help to increase confidence amongst buyers, but these have to be realistic and supported through evidence. Buyers and their advisers will be able to see through any quick fixes you’ve tried to implement to boost profits.

3. Corporate Structure and Ownership

Is the structure and ownership of the company clear? Is the business too reliant on you as an individual? If your business is run through a limited structure, you will need to decide whether to sell the shares or just the assets.

A sale is likely to happen more quickly and closer to your valuation if you have a strong management team behind you who can be relied on. You will have to evaluate if the business can retain good employees, which may require considered incentives.

4. Engage the right group of advisers

Seek advice from an experienced accountant and solicitor who will inform you on the structure of the deal and share sale and/or asset sale, discussing the implications of each. An experienced corporate solicitor will take you through the whole process and organise all of the legal paperwork to ensure there are no unnecessary complications. A good solicitor will also ensure that you have the necessary post completion protection.

About the author: Gemma Lingard

Gemma is a Corporate-Commercial lawyer at Gorvins Solicitors. She has a great deal of experience, assisting on both commercial work and corporate transaction deals and has played a key role in a number of multi-million pound deals.

Gemma has developed particular expertise in advising new start-up businesses, drafting shareholder agreements, company restructuring and drafting the terms and conditions of a variety of different business types. Gemma also is an integral part of the Gorvins’ Family Business team, which work closely with many family businesses across the North West and beyond, where Gemma is regarded as a trusted adviser.

If you would like to contact Gemma in regards to your business or any other legal issue, ring 0343 507 5151 or email [email protected].

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