Every business is different, however there are some common elements to a business sale. You need to have a willing seller and buyer. Both need to agree the main terms of a deal and then work through the extensive detail of the transaction. That detail will involve a buyer carrying out Due Diligence (DD) on a wide range of matters, including Legal, Financial, Commercial, Operational and Tax. It also involves the agreement of a Share Purchase Agreement (SPA). The sale completes when the SPA is signed, with the buyer’s cash transferring to the selling shareholders, and the shares in the target business transferring to the buyer. Once a business owner decides to sell, it usually takes around 9-12 months to complete the sale process. There are three main stages to the process: The first stage is the preparation phase, where the selling business (typically under the guidance of their advisory team) will assemble the financial, legal, commercial and operational information that prospective acquirers will want to know. A good advisor will also work with the sellers to make the target business as attractive as possible for acquirers, providing clear guidance on current performance and future growth opportunities, in order to maximise deal terms and value.
The second stage is approaching a range of potential buyers – under a signed Non-Disclosure Agreement (NDA) - to present the business and understand each buyer’s approach to acquisitions. Ensuring there are a good number of competing acquirers is important, as this competitive environment means sellers will have the best possible choice of the type of deal they pursue.
Once the main terms of a deal are agreed with a preferred acquirer, a transaction moves to the third and final stage, inside an exclusivity period with the preferred buyer. This stage is focused on allowing the buyer to investigate all aspects of a business in a DD process. It involves lawyers and accountants investigating the financial, commercial, legal and tax aspects of the business. It also involves both parties’ lawyers negotiating the SPA. It is worth noting that any sale process places significant demands upon business owners. Having the right advisors on your side and lots of stamina is essential.