Top tips when preparing to sell your business
It is important to be well prepared and organised in advance of putting your business on the market for sale. This will not only avoid costly delays but could also maximise the value of your business. We have provided our top tips to assist you in preparing to sell your business.
“Get your lease in order"
If you lease commercial premises it is important to review your current leasehold arrangements and determine:
How long is left to run?
If your lease has expired and you are holding over or if there is only a short period left to run you should consider negotiating a new lease or an extension with your landlord.
What are the assignment conditions?
Your landlord could withhold consent to the assignment of lease if these conditions are not satisfied, so it’s important to be aware what they are and what the landlord can ask for.
Do you fully understand your lease?
It is always worth understanding where you are at with your term, options, rent and other obligations so you can summarise these to a potential buyer. (A commercial lawyer can prepare a lease review for you to form part of your due diligence as well as identifying anything unusual or onerous).
"Sort out your important contracts"
If your business is reliant upon certain key suppliers, customers or employees you should make sure (where possible) that formal written agreements are in place before the sale:
* convert any verbal agreements into written agreements as soon as possible; and
* review any existing contracts with suppliers and customers to ensure they are still current, have plenty of time left to run and can be easily assigned to the buyer as this could enhance the value of your business to a prospective buyer.
“Decide what you are selling”
This is a crucial part of any sale of business and can cause problems if not decided and documented properly at the start.
* Take appropriate advice and decide whether you are selling the business or the shares in the company.
* If the business is being sold, you should prepare a detailed schedule of all the plant and equipment, furniture, etc. that is included in the sale as well as a separate schedule of what is excluded. The included items should be valued so there is no dispute down the line.
You must let the buyer know which (if any) of the plant and equipment is subject to hire purchase agreement or equipment lease, etc.
* If you are unsure a commercial lawyer can conduct a search for you at the Personal Properties Securities Register (PPSR).
- You should be one step ahead in contacting the relevant companies and obtaining discharge certificates or arranging for the transfer of the hire purchase agreements, etc.
If you agree to sell something ‘free from encumbrances’ which later turns out to belong to a third party you could be liable to the buyer for damages.
If you own your business premises you should consider whether to sell these also or lease them to the buyer. Leasing can be useful where vendor finance is involved.
“Get on top of your financials"
You will need complete financials to provide to a business valuer to prepare a true and accurate valuation of your business.
You also need to make sure you have at least 3 years (preferably audited) profit and loss statements and balance sheets to provide to any potential buyer (subject to execution of a tight confidentiality agreement, of course).
“Prepare a seller’s pack"
All large companies conduct a sellers’ due diligence and prepare ‘sellers’ packs’ containing all information and documents relevant to the business to give to prospective buyers (often held within electronic data rooms). In any event, you must ensure that your business is tidy and complete and available for inspection when necessary.
This will give the buyer everything they need up front so they can hopefully move quicker with the purchase and potentially increase the sale price.
This is just a snap shot of some of the things you should think about getting organised prior to sale.
For further information or for your FREE SELLER’S CHECKLIST please contact Helen Kay at Rise legal.
Liability limited by a scheme approved under Professional Standards Legislation