Partner Mark Williams discusses preparing your business for sale.
The process of selling your business can be a varied experience depending on the circumstances of the business in question.
Whilst no one knows with any certainty if or when the Government will seek to make changes to Capital Gains Tax and Business Asset Disposal Relief, the possibility of such change still looms large. Accordingly, it is never too early to start preparing for the sale of your business especially if you want to take advantage of the current tax regime.
Taking certain steps prior to beginning the sale process can save time and costs. If your business is in good order, this ensures the process will run smoother and minimise the risk of a buyer seeking to ‘chip’ the purchase price if and when issues are uncovered in their due diligence.
If you are considering selling your business, you need to consider the following:
- Know the value of your business – Depending on the size of your business and its assets, it is likely to be worthwhile instructing appropriate experts to value your business. Knowing the real value of your business will ensure you maximise the sale price when entering initial negotiations.
- Prepare for due diligence – The appeal of your business can extend beyond its physical or online appearance. The due diligence process can reveal issues you may not be aware of nor anticipated. Assessing and addressing in advance your company’s weaknesses will help avoid problems with the buyer further down the line.
- Books and financial records – Preparing a transparent set of financial records in advance of inspection by a potential buyer will be beneficial. For example, whilst businesses are under no obligation to prepare Management Accounts, it is a very frequent request from the Buyer and an efficient way to assess the up to date financial position of your business.
- Consider your assets – Each business has different assets, e.g. goodwill, equipment, land, intellectual property. Assets can have real value whether or not they are tangible. Ensure you have correctly registered your title over the property whether it be freehold or leasehold. Consider whether you should protect your intellectual property by registering it.
- Contracts – The absence of written agreements with key suppliers, customers or employees can alarm potential buyers when they come to inspect your contracts. Ensuring your contracts are in writing can add value to the business and avoid pressure from the buyer to hurriedly negotiate or sign written agreements prior to completion of the sale process, or at worst, cause the Buyer to seek a price reduction.
- Find the right adviser – The sale process can be stressful and there are many facets that sellers will not be able to anticipate. In order to ease the process, it is vitally important to ensure you have good, experienced solicitors, accountants and tax advisers to provide valuable support during all stages of the transaction.
If you would like more information on what to expect from the process of selling your business, please contact Mark Williams, partner in the Corporate team, for a copy of our free Guide to Company Sales and Purchases.