Okay – so you have decided to sell all or part of your business. You have found a willing and able buyer and have struck a price that meets with your expectations. Before you crack the champagne, there are a number of questions you should ask yourself before proceeding to documentation and completion.
One of the first issues to address is tax advice. If not, you could be missing out on valuable CGT concessions or other tax benefits available. Too often the deal reaches execution stage, only for one party (usually the seller) to request a game-changing structural amendment due to the implications of tax advice received too late.
Another question is whether or not you will actually get paid. It sounds obvious, but if you’re not getting the whole payment upfront (which is most cases), you need to ensure there is certainty around the payment process. This means clearly setting out the elements that trigger a price adjustment (rise/fall clauses), taking some form of security over the buyer or their assets (such as a guarantee or a charge) and ensuring that the timing for payment is unambiguous. We usually throw in a penalty interest clause for good measure.
It is also important to consider whether or not the buyer is a good cultural fit for your clients. Obtaining the right cultural fit can make a huge difference to sellers due to the ease of doing business with the buyer and is likely to save time and costs in negotiations and consequently reduce the stress associated with the sale. Selling to a culturally aligned buyer will also ease the integration process and increase the prospect that revenue targets will be met and the price will be maximised.
The last important point to consider is where your risk exposure ends. In most cases, you will remain liable the acts and omissions of you and your staff pre-sale. However, there should be an end date to this risk and your lawyer should negotiate a limited claims period and a reasonable liability cap.
