Now you know what is involved in selling your business, you know how important it is to have the right team around you to guide you with each element of your transaction and ensure the best outcome for you.

Who is involved in the transaction?

The team that you need to sell your business will vary depending on the size and nature of the business. However, I would expect:

1. Solicitor – we can support you with each element of the transaction. We can provide initial advice on the structure from a legal perspective, draft your non-disclosure agreement to protect your confidential information and Heads of Terms, manage, assist you with and advise you on due diligence, negotiate and draft your governing documents for the transaction and assist you with preparation of your Disclosure Letter. We are there to support you at each stage of the transaction and have your best interests at heart.
2. Corporate Finance (CF) advisor or agent – they can help you craft the right deal structure for you and take your business to market in a discreet and confidential manner.
3. Accountant – your accountant is key to assisting with responses to tax and accounting enquiries and dealing with any purchase price adjustment mechanisms, warranties and tax covenants in the SPA and the implications for you from a tax perspective
4. Independent Financial Advisor – once the deal is done you need to consider how best to invest that money to protect your future. An independent financial advisor can assist with this and we would advise you get them involved at an early stage so that they can assist you with ensuring the deal structure and price is right for your future needs.

Selling your business is a big step to take. Before moving forwards with this, make sure that you have the right team around you to support you with each stage. At the end of the day, it needs to be a team that you not only Trust but that you get along with. After all, there will be a lot of hours, calls and meetings required to get the deal done and having a supportive team that you can call on and talk to on a frank level is essential to reach a positive outcome for you.

Please do get in touch with Holly Threlfall or the team on 01604 828282 / 01908 660966 or email info@franklins-sols.co.uk

Selling a business can be daunting. There are a multitude of considerations that you will need to have, decisions to make and unfamiliar processes to engage in. If you want a successful sale you need to prepare not only your business but yourself for the sales process. Doing so will not only maximise on your sale value, but reduce stress and anxiety by ensuring that you are fully appraised and confident in the decisions you make. In this series, I am going to consider five key elements of any transaction that a Seller will need to consider:

1. Determining the structure of transactions
2. Heads of Terms
3. Due Diligence Enquiries
4. Transaction Documents
5. The teams involved in your transaction

Transaction Structures

Transactions can have a multitude of different structures and each deal will need to be tailored to you and impacted by how you have operated to date. However, there are two key principle ‘sale structures’ commonly adopted: Share Sales and Business Sales. Although each transaction will follow the same pathway of heads of terms, due diligence and transaction documents the actual documents themselves and risks involved in each transaction does vary significantly.

Share Sales

A Share Sale is more commonly preferred by Sellers where you have operated through an incorporated company. This is where you personally sell the shares that you own in your company to your buyer. The business itself remains ‘intact’ and therefore no property transfers, TUPE transfers or contract assignments are required which can help preserve the continuity of business and cause less disruption to the day to day running of the business.

Business Sale

A ‘Business Sale’ or ‘Asset Sale’ (which are very similar in nature) is where an individual or a company sells the components or specific assets which together make up a business. Whilst this can be a lower risk from a buyer perspective, it can cause more disruption to the business as you have to transfer each asset and obligation to the buyer for them to continue the business and may involve TUPE transfers, property transfers and contract assignments.

Which is Best?

There are pros and cons to both structuring the deal as a Share Transaction or a Business/Asset Transaction.

Structuring the deal as a Share Transaction may:

1. be more tax efficient for a seller
2. involve a higher level of due diligence and disclosures
3. involve a substantial number of documents to effect the share transfer and change of ownership itself
4. increase the risk to a buyer as they inherit both liabilities and assets
5. cause less disruption to the operation of business itself

Structuring the deal as a Business Transaction may:

1. enable the buyer to ‘cherry pick’ assets and ‘leave behind’ certain liabilities
2. involve more documentation to physically transfer the assets to the buyer
3. cause more disruption to the business, especially if there are employees who need to be consulted on the pending transfer of the business
4. involve more costs for the buyer, especially if property needs to be transferred which could incur Stamp Duty Land Tax
5. Reduce the direct liabilities of the individuals involved in the deal if they operate through a selling company

Ultimately, every transaction will be different and what works for one set of parties may not work for another. It is about balancing the risks and benefits of the parties in each deal to agree a structure which both are happy to proceed on.

If you would like to know more about structuring deals and considerations in a pending sale, please don’t hesitate to contact Holly Threlfall or the team on 01604 828282 / 01908 660966 or email info@franklins-sols.co.uk

Who can help you with your structure?

Planning the structure of your transaction involves not only your solicitor, who can advise on the various risks and accountant, but also a broker (usually an expert in Corporate Finance) who can help with only valuing your business; this can be impacted by many factors including turnover, profit, industry multipliers and net asset value). Having an agent on hand who can help you construct a the deal in a manner that suits you and help you handle any key negotiation points early on is key to lining up a successful sale

What next?

Once you have agreed a structure in principle, it’s time to move onto Heads of Terms.

I often get asked what the benefits are of a share sale over an asset sale. The truth is, there are pros and cons to each structure and you need to ensure whatever route you take is the right one for you. However, I have outlined a few key factors to consider below:

In an asset sale:

1. The buyer ‘cherry pick’s the assets they need to run the business. This can include real property, physical assets and equipment, specific contracts, intellectual property, branding and goodwill. Any real property transferred would be subject to stamp duty at applicable rates.
2. The seller usually retains liabilities (unless otherwise agreed) and still needs to discharge these. This includes any tax liabilities due to HMRC.
3. If the seller is your company, the company is the contracting party and your liability is limited as an individual (unless you give a personal guarantee)
4. Employees are required to transfer to the buyer’s employment under regulations commonly known as ‘TUPE’.
5. Other contracts will need to be individually assigned or new contracts (such as insurance) taken out by the buyer. Customers and suppliers therefore will need to be notified and this can interrupt the continuity of business.

In a share sale:

1. The ownership of the company changes, not the ownership of its assets. Your company continues to own all of its assets.
2. Contracts with the company remain in place. This can preserve continuity of business, as usually there is no need for assignments or new contracts to be entered into. The employees also continue to be engaged by the Company without the need to apply the TUPE regulations.
3. Just as assets remain in place, all liabilities also remain in place and the buyer indirectly assumes these. This is why due diligence on a share sale needs to be particularly thorough.
4. Provided you qualify and the transaction is properly structured, the proceeds of sale are subject to capital gains tax rather than income tax. This means you may also qualify for Entrepreneurs Relief which can have a substantial impact on reducing your tax liability.
5. A buyer is required to pay stamp duty on the transaction, this would be at a rate of 0.5% (rounded up to the nearest £5.00).

For further information in relation to a business sale, contact Holly Threlfall and the Corporate team on 01908 660966 / 01604 828282 or email Corporate@franklins-sols.co.uk.

1. Preparation – as with anything else in life, preparing your business for sale is key. From preparing for the due diligence process to planning the sale structure and your exit plan, this is fundamental to maximise on your sale and prevent your buyer from chipping away at your purchase price.
2. Value your business and find a Buyer – A Corporate Finance Advisor can assist you with this process and finding the right buyer and structure for your deal. You should ensure that you have in place a comprehensive Non-Disclosure Agreement to protect your company’s information and know-how. Once you have found a buyer and agreed a purchase price and structure in principle, this should be documented in the Heads of Terms. These are largely non-legally binding but it is important to make sure the headline terms are agreed to prevent any protracted negotiations on your deal.
3. Due Diligence Enquiries ­– Your buyer will raise a series of questions about your business, its assets and historic trading position. It is important to answer these honestly and carefully to ensure that you are not exposed whilst ensuring the Buyer has sufficiently detailed information to assess the purchase. We can assist you with this process through management of a data room for you to provide your responses through.
4. Legal Documents – Your transaction will contain a series of legal documents from your sales contract (which may take the form of a Share Purchase Agreement or Business Sale Agreement depending on your structure) through to a Disclosure Letter and ancillary documents required to effect your transaction itself. These need to be carefully drafted and negotiated to ensure that you know what you are signing up to.
5. Completion – This is where all of your hard work pays off! Exchange and Completion is often simultaneous in these deals, so the point where you are legally bound is also the point where you hand over the keys to your business. Of course, in most transaction you usually receive the proceeds of sale (or part of it) and you can begin planning your next endeavours!

For all enquiries relating to the sale or purchase of a business, contact our expert Corporate team on 01604 828282 / 01908 660966 or email Corporate@franklins-sols.co.uk.