Thinking of selling your business?
When I speak to business owners who are starting to think about a sale, the first questions are usually: how much can I get, who might buy it and how quickly can this actually happen?
They are entirely reasonable questions.
But in my experience, buyers tend to come at it from a different angle. They start with the basics: is the business properly put together, do the legal and financial foundations hold up, and will it be straightforward to step into or are there hidden issues that are likely to become their problem once the deal is done? In short, they look at risk first.
That gap in perspective is where we often see things start to wobble. I have been involved in transactions where the business itself was strong and valuable, but the process lost momentum and fell over because something avoidable came out too late and created doubt. On the other hand, I have seen businesses with fairly ordinary numbers achieve excellent outcomes because they were well organised, due diligence was easy to go through and they gave the buyer comfort from the start.
If selling is something you are considering, whether now or in a few years’ time, there are a few areas which buyers will almost always notice early on.
Preparing business for sale: key areas to address
Ownership and company records
This is one of those points that sounds obvious, but it comes up more often than you might expect. A buyer will want to be sure that the person selling the business has clear title to it and that the company records support that position. If share allotments are not properly documented, historic transfers are handled informally, statutory registers are out of date (or worst do not exist) or Companies House filings do not reflect what has happened in practice, deals can start to unravel quickly. I often find owners feel they can explain it, but buyers and their advisers will want to see it evidenced and, where needed, rectification before they are comfortable.
Contracts that have been left to drift
A lot of owner-managed businesses are built on long-standing relationships and mutual trust, which is a real strength, but the difficulty is that on paper those arrangements do not always reflect how important they have become to the business.
When a buyer starts looking at a business, they will want to understand how secure those relationships really are and whether they are documented in a way that matches how the business actually operates. It is not about making everything overly complicated, but it does help enormously if those relationships where the business depends on key customers or suppliers are documented properly.
Intellectual property that is assumed rather than owned
This is something I see quite regularly. A business may have invested in its brand, its website or its systems over a number of years, and from the owner’s perspective it all feels very much part of the business. When it is looked at more closely, it can turn out that trademarks were never registered or work created by third parties was never formally assigned to the company.
Owners often assume that, because the business paid for these assets and has always used them, they belong to the company. Buyers take a more careful and, frankly, more correct view, as they will expect the company to own its key assets cleanly and without question.
Historic loose ends
All businesses have history which is normal, but what matters is whether old issues have truly been resolved or simply parked and forgotten, matters such as outstanding disputes, employee grievances, informal loans, property issues, compliance gaps or regulatory matters.
Once due diligence begins, these issues can come back quickly and any uncertainty around them tends to feed into the wider conversations between the parties. From my perspective, these are often easier to deal with before a process starts rather than trying to deal with them mid-transaction and renegotiating the terms.
A business that still revolves around the owner
Many founder-led businesses rely on the owners for nearly everything because customers trust them personally, staff defer to them instinctively, and years of know-how sit in their head rather than in systems or documents. This is usually a reflection of how the business has grown but it does have an impact on a sale. Where a buyer feels that too much sits with the owner personally, they will look at how that risk can be managed. They are more likely to ask for earn-out arrangements, consultancy periods, restrictive covenants or a longer handover than the seller had in mind, meaning a lesser chance of a clean break that a seller may have envisaged.
Stepping back
What we see time and again is that a sale becomes much easier when nothing in the business feels like a surprise. Where everything lines up with how the business has actually been run, buyers tend to relax into the process and conversations move forward as they should. In practice, most of the sticking points we come across are not complicated; they have just been left alone for longer than they should have been. Giving yourself a bit of time to deal with them before anything is on the table usually makes the whole process feel far more controlled and far less reactive.
Talk to our team
At Fisher Jones Greenwood, we understand that selling a business can be complicated. Our experienced corporate commercial lawyers provide clear, practical advice to help you navigate this process with confidence and achieve the best possible outcome.
Natasha Bhandari is a Senior Associate in our Corporate & Commercial team at Fisher Jones Greenwood LLP. She advises entrepreneurs, owner-managed businesses, family enterprises, SMEs and large corporates on strategic corporate transactions and structural matters. Her work includes share and asset acquisitions and disposals, management buy-ins and buy-outs, joint ventures, restructures and shareholder arrangements.
For further information or to discuss how to prepare your business for sale, please do not hesitate to contact our team using our online contact form or call 0845 543 5700.