Business Sale
Business Sale
The sale of a business typically means selling office premises, goodwill, stock, staff and contracts. It can be a complex transaction that may involve selling just the assets of the business or transferring its shares. There are many and varied transactions and you will require advice and assistance from expert business lawyers.
The sale of a business will be a business transaction and, like all business transactions, it is important to ensure you secure the right price.
There are several stages to buying or selling a business. They include valuing the business, getting tax advice, market research and marketing, preliminary offers, negotiating terms, heads of agreement, legal sale and purchase agreement, completing due diligence, and finally, completing the sale.
It can be a complex and time-consuming process and it makes sense to take expert advice from professionals throughout so as to avoid costly mistakes and unexpected obligations. A solicitor should be involved from the outset, with the drawing up of a legally-binding confidentiality or non-disclosure agreement to be signed by all prospective buyers before they receive the sales memorandum.
Once an offer has been made and accepted, the next step is to negotiate the firm purchase offer, which is called a Heads of Terms agreement, or Heads of Agreement. This document sets out the main points of the sale and is not usually legally binding – except for issues of exclusivity and confidentiality.
The Heads of Agreement should cover:
- what is included in the sale
- the price and payment structure
- the terms of the period of exclusivity to complete the sale, including that period’s termination
- preconditions for the sale
Other legally-binding agreements include the seller’s disclosure letter limiting his liabilities under the warranties, and any agreements from the seller and buyer to pay each other’s costs in certain circumstances if the sale falls through.
Your lawyer will be responsible for drafting and checking these documents and liaising with the other party. Once the Heads of Agreement is signed, the buyer’s advisers carry out thorough searches into the business records, the due diligence phase. During this period, negotiations continue with the seller on drafting the final sale agreement, or sale purchase contract. Again, your lawyer is responsible for ensuring all the agreements made during the negotiations are included in the sale purchase contract. After signing, the buyer’s and seller’s solicitors ensure that each side keeps the original documents they need.
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