I’m looking to sell my business – Is it actually worth buying? - Palmers Solicitors

I’m looking to sell my business – Is it actually worth buying?

I’m looking to sell my business – Is it actually worth buying?

If you’re planning to exit by selling your business, this is the question that should be at the front of your mind.

A number of factors influence the worth of a business and whether buyers or investors are likely to take on the risk by purchasing it.

Once a prospective buyer has proposed an offer, they will gain access to your legal and financial records for a set amount of time to allow them to conduct due diligence.

They will use this time to address specific concerns that they have with your business and gain a holistic understanding of your operations and any risks to them.

For this reason, you’ll need to conduct your own due diligence to ensure that your business is compliant and in a positive state to be sold.

Due diligence encompasses three primary areas:

Legal due diligence

Engaging a legal expert to review the business ensures that it complies with all regulatory requirements.

This includes making sure that your business:

  • Complies with employment regulations, now and historically
  • Complies with tax regulations
  • Has the necessary contracts in place with suppliers
  • Is not subject to ongoing disputes
  • Is properly registered and meets its filing requirements

This step should uncover any ongoing legal responsibilities that could pose risks to the business post-acquisition and therefore threaten a smooth sale, such as being subject to a court order.

This includes considering ongoing contractual obligations which may be transferred to a prospective buyer and could present a roadblock to the sale.

You should also ensure that ongoing contracts allow for transfer of responsibility due to sales and that a sale wouldn’t contravene any prior agreements.

Financial due diligence

This step involves scrutinising financial records to identify any concealed issues.

A buyer’s accountant typically takes the lead in examining the company’s financial obligations, including debts and tax liabilities, to ensure a clear understanding of what the acquisition entails.

However, you should also make sure that you are meeting all your legal financial obligations, including the reporting and paying of tax, and paying staff the wages to which they are entitled.

Failure to do so could result in disputes which disrupt or prevent the sale.

Commercial due diligence

Evaluating the business’s competitors and its position within the industry is essential. This analysis should only commence after finalising the terms and price with the buyer.

Initiating due diligence might also lead to you temporarily removing the business from the market, provided you’ve agreed on an exclusivity period with the buyer.

This phase is crucial for making an informed decision about proceeding with the purchase.

For further support with selling your business and preparing it for sale, please get in touch with us.