Top five tips for preparing to sell your business
Selling your business can be a daunting and unfamiliar process. We have helped hundreds of clients with selling their business and we understand that it can be a challenging task.
To assist, below are our top five tips based on our experience to help you prepare for the sale of your business, so the process can proceed as smoothly as possible.
Building a supportive team around you to assist with the sale will be vital. This will involve assembling a team of legal, financial and tax advisors to guide you through the transaction.
In addition to the external team, it is also a good idea to assemble an internal team who can attend to the requirements of the sale process, such as preparing the information for potential buyers to review and responding to due diligence queries. This will also allow others to focus on the business whilst the transaction progresses. Ensuring that your external advisers work together with your internal team will benefit you by ensuring the transaction is completed as efficiently as possible and will enable your business to continue to operate effectively during the sale process.
Often a transaction can be an onerous process of collating documents and details for the purposes of the sale process. This can occur prior to the commencement of the sale process to ensure the sale process proceeds as quickly and efficiently as possible.
You should ensure that your business has well documented financials, contracts with employees, contracts with suppliers and contracts with customers. Having properly documented arrangements with key stakeholders in the business will add value to the business in the eyes of potential buyers.
It is also important that the relevant information is easy to locate and accessible to potential buyers. Using an electronic data room assists in this process and can contain some protections to assist in ensuring that potential buyers only use the information for their due diligence investigations.
Preparing the appropriate information as early as possible will make the due diligence process slightly less painful and demonstrating preparedness will also help to gain confidence from potential buyers in the way the business is run.
The terms on which you sell your business will materially affect the ultimate value of the transaction to you. It is important that you do not only focus on the price during negotiations as there are other terms that could affect what you take away from the transaction. Getting your legal advisors involved early will help you avoid these pitfalls. Some examples of those are as follows:
Selling your business will likely have capital gains tax consequences and you should consider the potential tax implications prior to entering into a sale agreement. In some cases, goods and services tax can also apply to the sale of your business. You should consult your accountant or one of our expert taxation lawyers regarding the potential tax implications to avoid being met with a nasty surprise at the end of the transaction.
Once the transaction terms have been finalised it is necessary to turn your mind to the settlement process. The better prepared you are for settlement, the smoother and easier the process will be.
Some key items that will need to be attended to are as follows:
Accordingly, it may be necessary for you to contact those counterparties to obtain their consent prior to the transaction proceeding.
If you are considering selling your business, contact a member of our Private Enterprise team.