Selling a business can be expensive, complicated and time-consuming, and may also have significant tax implications, so you need to plan carefully and get the right advice at an early stage. In this series of briefings, we will explain the full process of how to sell your business.
Once the parties have signed the heads of terms, the buyer will begin its detailed investigation of the business – the process called ‘due diligence’.
Due diligence is designed to help the buyer to identify problems which need to be covered in the sale agreement, and any consents required for the transaction. Issues identified in due diligence may make the buyer want to renegotiate the price or even pull out of the deal altogether.
What will the buyer ask for?
A buyer will be interested in:
- The trading position of the business – e.g. key contracts, debtors, creditors and capital commitments
- Onerous obligations – e.g. long term contracts involving high payments
- Ownership and condition of assets – e.g. title to land, the terms of any leases, or the condition of stock
- Employees – e.g. employment terms, salary payments, pensions and other benefits
- Litigation – e.g. disputes with customers or claims by employees
- Taxation – e.g. tax arrears or disputes with HMRC
- IT and intellectual property issues – e.g. computer contracts and the right to use software or trade marks
Due diligence can be very time-consuming for the seller, particularly if the buyer insists on a detailed investigation, so it will help if you have organised your paperwork in advance.
Click here to read the full briefing series: Selling a business.