Are you ready to sell your business?

Pattersons Commercial Law managing director Rik Pancholi advises on business sales for buyers and sellers

As specialist commercial lawyers, we have advised on hundreds of transactions over the years and have seen many businesses purchased and sold. We are often asked about what a seller should be doing to prepare and what a potential buyer is likely to look for.

This article explores some of the things a prospective buyer and a potential seller will want to understand before negotiating a business sale.

Aside from knowing the price the business will fetch, a seller will want to prepare their business for sale before putting it on the market. This will range from mentally preparing themselves for the sale and accepting they will no longer be the owner, through to carrying out their own due diligence to make sure their business does not have any ‘holes’ which the buyer can poke to get themselves a better deal.

The buyer will, of course, want to get the best possible bargain they can and is likely to want to carry out a detailed due diligence exercise to understand if the price the buyer has asked for is worth it.

Some of the key areas of due diligence will revolve around the financials, property, employees, and the commercial prospects.

Property is an area which often comes to the forefront of both the buyer and the seller’s minds when negotiating the sale. Sometimes the transaction is carried out on the basis that the buyer can enter a territory which they don’t currently operate in and therefore they will want to place close attention to any lease obligations, potential dilapidation costs and any rent review provisions. Buyers will want to be aware of any personal guarantees they may have given, and these may need to be released as part of the transaction. If the property is owned by the seller, consideration will need to be given to whether they will become the landlord or whether the property will be sold to the buyer at the same time as the business.

When considering the employees, do they all have a current and up to date employment contract? If they don’t, the business may not only be in breach of its employment law obligations, but it may expose itself and end up costing more in the long run.

A buyer is not likely to want to take on a business where there is already a breach of employment law and end up inheriting a potential liability. Buyers will also want to consider if any of the employees are surplus to requirements and this is often a key area of discussion between the buyer and the seller.

If you are a prospective seller and would like to find out more about how you can prepare yourself and your business for sale, we are here to help advise you on your next step.

Contact Rik Pancholi and his team at Pattersons Commercial Law on 0116 319 1110 or at pattersonscommerciallaw.com.

WHEN CONSIDERING THE EMPLOYEES, DO THEY ALL HAVE A CURRENT AND UP TO DATE EMPLOYMENT CONTRACT?