If you are contemplating selling your business here are some tips on what to look out for and what preparation you can do now to prepare for the sale.
Here, we give a general overview of the areas of due diligence that apply in the sale of most businesses, to prepare you for the enquiries and demands you can expect from a prospective buyer. Organisation is key, so having the relevant documents readily available along with an index can be very helpful in keeping track of the due diligence any purchaser will require.
Your business
As the seller, you must show that the business is fully compliant with all statutory regulations and with data protection legislation. To this end, all related documentation should be prepared and submitted, such as any governing body’s proof of registration, licence and a copy of your health and safety policy. An approximate stock value and details of any complaints or pending legal issues; failure to be upfront with this information could have a detrimental effect on sale negotiations and can lead to law suits after completion. Similarly, the buyer should be provided with signed accounts for the business spanning the last three years, as well as copies of any mortgages or charges to be paid by the business.
Goodwill
To prove the goodwill of your business, a copy of any contract with any customer/client/company that have you in place should be provided to the buyer, together with copies of annual reviews and any other relevant documentation or correspondence. While it is advisable to inform the buyer of what you are planning to do after completion as this may affect the practice’s goodwill, you are not obligated to volunteer this information. Your accountant will provide figures to help place a value on the Goodwill.
Employees
Staff can be a major selling point for your business, especially as familiar faces play a significant part in maintaining a business’s goodwill. Along with providing information such as employment terms, details of PAYE and National Insurance contributions and details of any disciplinary action, you should also provide proof of your staff’s qualifications and continuing personal development (CPD) records.
Contracts
When selling a business, it is especially important to submit copies of all contracts to show regulatory compliance and to give assurances of smooth continued operations following completion. So, you should provide the buyer with copies of any lease or tenancy agreements, commercial or service contracts for items such as your photocopier, software and PCs as well as any waste disposal contracts.
Property and equipment
The buyer will need full details on the property where the business operates. Together with documentation showing tenancy/ownership and occupancy information, a plan showing the property boundaries should also be submitted, as well as proof of planning permissions allowing the property to be used for your purpose, as well as Building Control approval for any improvements. Any easements or covenants should also be disclosed. Every effort should be made to show the buyer that the premises are in good, safe condition; this means providing copies of any asbestos survey reports, fire and risk assessments and energy performance certificates.
It is equally important to show the good condition of the business’ equipment; repairs and maintenance records should consequently be submitted to this end and an appraiser called in to give valuations.
Expert guidance At James McNulty & Co. Solicitors
We understand the complexities of selling and buying a business, so we can walk you through the process to completion. For more information, call Cathal Murray on 028 822 421 77 or email cathal@jamesmcnulty.co.uk
This content is not intended to be used as a substitute for specific legal advice or opinions.