1. Is it the right time to sell your business?

First things first, is this the right time?

This is a big question, and one that goes into all areas of your work and life. Most business owners have periods when they’re tired, frustrated and struggle to remember why they started a business in the first place. While the prospect of just waving goodbye to the stresses and strains of running your business is appealing at times like this, that doesn’t mean it’s going to be the right thing for you in the longer term.

You’ll want to consider whether your business is actually sellable at a price that will make it all worthwhile for you. If selling your business is unlikely give you the payoff you deserve for all your hard work, maybe you should hang on in there a bit longer. 

Sometimes, it’s hard to admit that your business might not be as valuable to someone else as it is to you. If your business heavily relies on your personal skills, connections, or knowledge, it might struggle without you. Or maybe you have lots of orders coming in, but you’re not sure why—and wouldn’t know what to do if they stopped. There may be things you can do to improve your company’s value significantly, which will motivate you enough to stick with it for another year or two.

To get a clear picture, you might want to do a quick business MOT. Chat with a corporate finance expert (if you don’t have a contact, let us know and we can put you in touch with one of our corporate finance partners). They’ll help you figure out if your business is attractive to potential buyers and even give you a rough idea of what you could expect from a sale. 

For more pointers, see our guide ‘5 questions to ask before selling your business.’ 

2. Do a Pre-Due Diligence Check-Up

You think your business is in great shape, but will potential buyers see it that way? It’s like prepping your house before putting it on the market—time to do a thorough check under the hood.

Look at things like:

– Contracts with customers and suppliers
– Relationships with sales agents
– Employee matters
– Company documents and processes

There might be some hidden issues that could lower the value of your business or lead to some pretty stressful post-sale situations. By spotting these early, you can fix them up before any buyers come knocking. We can help with a pre-due diligence service to flag up any potential problems – take a look at this post on pre-due-diligence for more details. Plus, we can introduce you to company growth experts who can help boost your business’s value before you sell.

3. Finding the Right Buyer for your Company

Sometimes, offers to buy your business can come out of nowhere. While it’s flattering, it can also be tricky. If your business isn’t sale-ready or you haven’t done your own due diligence, that great offer might shrink once the buyer digs into the details. And once you start thinking about the money, it’s tough to walk away—even if the offer drops.

Ideally, after prepping your business for sale, you’d work with a corporate financier who can help you explore different markets to find the best buyer. They’ll consider whether a competitor, someone in your supply chain, or even an investor looking for a profitable venture would pay the most for your business.

Your corporate financier will put together an Information Memorandum—a kind of brochure about your business to share with potential buyers. Once someone’s interested, they’ll sign a non-disclosure agreement (which we can help prepare) before learning more about your business. If you have multiple interested buyers, you might enter negotiations with a few before choosing the best fit.

Click here for more information on finding the ideal buyer for your company.

4. Agree on the ‘Heads of Terms’

Next up is agreeing on the Heads of Terms. This is the high-level document that outlines the main points of the deal, including the purchase price (which could change after the buyer does their due diligence) and how the deal will be structured.

For example, the Heads of Terms might say you’ll get the full purchase price at Completion (the moment the business officially changes hands). But many deals include an ‘earn-out’ period, where part of the payment is made after Completion, depending on how well the business performs.

We’d always suggest making sure you’re happy with the amount you get at Completion because there are many factors that could affect your earn-out. If getting all of the anticipated earn-out is essential to you reaching your ‘happy price’, this might not be the best deal structure for you.

During this stage, you and the buyer will also decide whether the sale will be a share sale (where the buyer takes over the entire company) or an asset sale (where the buyer picks and chooses which assets to take on).

If you need guidance on writing a Heads of Terms, click here.

5. Negotiate the Sale Agreement

Once you’ve agreed on the deal structure, the buyer’s lawyers will draft a Share Purchase Agreement (SPA) or Asset Purchase Agreement (APA), depending on what you decided. Your advisors will then review and negotiate the details.

There’s a lot to negotiate here, as both sides try to protect their interests. The buyer will want to minimize their risk, and you’ll want to ensure the sale goes smoothly without any nasty surprises later on.

This part of the process can be straightforward or take a while, depending on what comes up during due diligence. It’s our job (and your corporate financier’s, if you have one) to help you keep the purchase price and deal structure intact while minimizing your liabilities.

Selling your business can be stressful, and sometimes you just need to vent to someone who gets it. Devant can be there for you, to listen and provide advice to keep you on track. Click for more information on negotiating a Share Purchase Agreement.

6. Due Diligence, Warranties, and Disclosures

Due diligence is like letting a stranger rummage through your business’s drawers and cupboards, asking questions about everything from finances to how your heating system works! For the buyer, it’s a crucial step in understanding what they’re buying.

The goal of due diligence is to:

• Uncover any hidden issues (legal, financial, property, HR) that could reduce the value of your business
• Identify areas where the buyer might ask for extra guarantees or protections from you
• Make sure they’ve valued the business correctly based on your actual financial performance
• Assess how well the business will fit into their plans post-acquisition

In the sale agreement, there will be a section on “warranties,” which are statements you make about your business being true. If any of these warranties aren’t accurate, you’ll need to disclose the truth, which we can help you draft.

This part of the process can be lengthy and requires your active involvement. It’s your responsibility to disclose everything relevant—missing something could lead to claims against you later. We can help manage the data room where all the documents are stored and guide you through the warranties and disclosures.

Click here to read a more in-depth article about due diligence, warranties and disclosures.

7. Completion (and Earn-Out!)

Finally, after maybe a couple of  late nights, you’ll reach Completion Day. This is when all the deal’s documents are finalised, and the business officially changes hands.

Completion might be the end of the sale, but it’s often just the start of the next phase. You’ll still need to think about:

• Hitting any targets if part of the purchase price is based on an earn-out
• Keeping some of the money aside in case the buyer makes any claims against warranties or indemnities
• Following any non-compete or restrictive covenants the buyer requested

But before diving into all that, take a moment to congratulate yourself. Building a business and selling it is a massive achievement, and something that many people only dream of. Well done 🙂

Click here for more information on completion and earn-out.

If you’re thinking about selling your business in the next few years, give us a no-obligation call for a confidential chat. The sooner you start preparing, the better price you’ll get—and the less stressful the process will be! And if you’ve already received an offer, let’s talk. We can help you decide if it’s the right time to sell and ensure you get what your business is truly worth.