Mergers & Acquisitions
Selling a business
For most owners, selling the company is one of the most important transactions they will make. We help you prepare the company, stay in control of the process and limit your liability after the sale.
When does a seller need advice?
- You are considering a sale within the next few years and want to prepare the company.
- A potential buyer has made contact and wants to sign an NDA or submit an offer.
- The buyer has presented a letter of intent or draft agreement.
- You will stay in the company after the sale or receive part of the price later.
- The company has several shareholders who need to agree on the terms.
What the engagement may include
Preparation
Review and tidying of corporate documents, contracts and ownership before the buyer examines them, so that any issues can be remedied or presented on the seller's terms.
Confidentiality and process
Confidentiality agreements, staged disclosure of information and protection of sensitive data when the buyer is a competitor.
Letter of intent
Negotiation of price, price mechanism, exclusivity and which terms should be fixed at an early stage.
Purchase agreement and disclosure
Limiting warranties, liability caps and time limits, together with a disclosure letter releasing the seller from liability for disclosed matters.
Earn-out and continued involvement
Definitions, measurement period, information rights and protection against the buyer influencing the outcome. Employment or consultancy terms for the seller's role after closing.
Key issues for the seller
- Liability cap
- The seller's aggregate liability should be limited to a proportion of the price and to a defined period.
- Disclosure
- Matters disclosed to the buyer should not give rise to warranty claims. This requires an agreed disclosure mechanism.
- Payment security
- Deferred consideration and vendor loans should be combined with security and clear payment terms.
- Non-compete
- A non-compete affects your opportunities after the sale. Scope, geography and duration should be reasonable.
Questions and answers
How long does selling a business take?
It varies considerably, but from letter of intent to closing it is often a matter of a few months. Preparation before the process starts can shorten the timetable and reduce the risk of renegotiation.
Should I sell the shares or the business?
For the seller a share sale is often simpler and may be more tax-efficient. The buyer may prefer otherwise. The structure should be analysed with both legal and tax advice.
What is an earn-out?
A part of the price paid later and dependent on the company's future performance, such as revenue or profit. It can bridge differing views on value but requires carefully drafted terms.
Related services
Mergers & Acquisitions
Sale and purchase of shares or businesses – from letter of intent to closing.
Business valuation
A basis for negotiation in sales, acquisitions and ownership changes.
Shareholders' agreements & buy-outs
Rules between shareholders and orderly exits when ownership changes.
Legal due diligence
Review of the company's legal position ahead of an acquisition or investment.