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You may be considering selling your business. Perhaps you’ve earned enough to sail around Monte Carlo for the rest of your life, maybe you’re bored and want to move on or maybe you’re simply ready to retire.
Whatever the reason for the sale any buyer will want to carry out a due diligence check. This means they will want to consider every aspect of the business including legal and tax implications, any existing employees, any existing debts and the future of the industry your business is in.

Confidentiality Agreements

If the information you are set to disclose is sensitive, consider asking the buyer to enter into a confidentiality agreement. This is something that Lawson-West would always seek to negotiate at the outset on your behalf as it could prove difficult to do once the process has begun.

Due Diligence – not just the buyer’s problem

If you are not a company then your buyer will be purchasing the assets but if your business is owned by a company then you will choose to sell either shares or the assets of the company. If you sell shares you are effectively ending the relationship between you and the company.

If dealing with a share sale the drafting of the share sale and purchase agreement will include warranties which will offer the buyer some comfort in the event that the business is not as it has been represented by the seller. You will clearly not want to provide warranties that are unlimited in scope to avoid any future problems.

An asset purchase will have to clearly identify what is and what is not part of the purchase. An asset purchase agreement will tend to include matters relating to employees, stock and equipment. Again warranties will be expected of the seller.

If you are able to provide comprehensive replies to the enquiries raised by your buyer then this will give your buyer confidence in you, in the business and in their purchase - thereby leading to a smoother sale.

Good due diligence replies can also be used as a reason to reduce the number of warranties you are asked to give. At this point, Lawson-West would then look to add a letter of disclosure to accompany the warranties to ’iron out’ and clarify any specific matters affecting the given warranties raised in your replies to enquiries.

The key is therefore in the preparation and this is where Lawson-West can help as we know what buyers are likely to ask and can therefore help you to be in a position to answer the questions. To give an example, you will have to transfer any premises. However, if the premises are leasehold and the landlord’s consent is required for the transfer, this could be timely and costly and may well be worth considering at the outset. If time constraints prevent the consent being obtained you could consider allowing the buyer to enter the premises on a licence. However you will probably have to offer some form of guarantee to cooperate with the buyer to obtain this consent and doing so may by itself be a breach of your lease. Therefore approaching your landlord early on can minimise delays and risk.

For more information or assistance when selling your business please contact David Heys at Lawson-West Commercial on 0116 212 1000 or see our checklist here.