As the economy has recovered and market confidence has improved, business sales have been on the rise.
Selling a business, whether big or small, can be a challenge. Being prepared at the outset of a sale can speed up the transaction, reassure a purchaser and ultimately ensure that you get the maximum value for your business. Property, whether freehold or leasehold, is integral to most businesses and often comprises much of the value. For example, this is often the case for hotels, care homes and other forms of holiday accommodation.
Our top tips to ensure that the sale proceeds as smoothly as possible are:
- Consider whether you own the freehold to the Property or occupy the Property under a lease.
- If the Property is leased and you want to transfer the Lease to the buyer, the starting point should always be to check the terms of the Lease to see what is required. Invariably, Landlord’s consent will be needed before the transfer of the Lease (and sale of the business) can go ahead. Often a lease will state that the whole of the Lease may be assigned with the consent of the Landlord, which cannot be unreasonably withheld. Obtaining a Landlord’s consent can be time consuming and has the potential to delay a sale; therefore it is advisable to approach the Landlord early on in the transaction for consent.
- If you own the freehold, have the title documentation ready and any other documents relating to the Property, such as planning consents and building regulation approvals, so this can be available to a buyer quickly once the sale is agreed in principle. Is the title registered at the Land Registry? If not, it may be advisable to register the title in anticipation of sale, which will flush out any potential issues and speed up the sale. If the property is mortgaged it may be necessary to request the title deeds from the lender.
- Are any third party consents required for the sale? For instance, if a lender’s consent is required to release the Property from their charge, you should discuss this with them at the outset.
- Consider what items are to be included in the sale and which items are not. An inventory of all fixtures, fittings, furniture, machinery and equipment will usually need to be prepared before completion.
- Discuss with your accountant the structure of the deal as early as possible. Consider how the purchase price is best apportioned between the goodwill, premises and other assets. This is an important point which needs to be agreed early, as it will have tax implications for both buyer and seller. This should be considered before the marketing of the business commences.
- Ensure that your accounts and statutory books are in order, up-to-date and accurate. You want to show a well-run business.
- Collate all relevant documentation in advance, which will to enable you provide a comprehensive information pack to any buyer as early as possible. Such documentation should include:
- Contracts, such as for the supply and sale of goods, credit agreements, hire-purchase or leases.
- Licences, such as the premises licence, music licence or civil marriage licence.
- A schedule of any employees of the business, including job description, pay, terms of employment, pension rights and duration of employment.
- A list of suppliers to the business with contact details. Consider whether the contracts will continue when the business is sold.
- Are there are any disputes or litigation concerning the business? Disputes won’t necessarily put off a buyer, but they will need to understand the situation and see that it has been handled properly.
- Consider whether a confidentially agreement is necessary with the buyer at the outset of the sale to ensure that the buyer will keep the terms of the agreement and all information acquired about you/the business confidential. Be very careful about giving out sensitive information about the business or any staff/customer details. Be aware of the Data Protection Act!
From our experience, more often than not, the most successful transactions are those where the seller is well prepared and the information is available at the outset; allowing any potential problems to be rectified in advance. This will enable a swift sale and minimise any opportunity for a buyer to seek to re-negotiate the terms or the sale price for any purchase.