Organising Your Documents
Depending upon the number of assets to be sold, the process of selling your company can take several months and involve multiple sales. In order to ensure a smooth transition, and avoid any unnecessary delays to the process, it is advisable to have all legal documents and records organised and ready to present to buyers. These can include leases, permits, employee contracts, and any ongoing agreements with suppliers that can be continued or ended, depending upon the future of the business once sold.
Have Your Business and Business Assets Valued
When preparing to sell your business, it is important to consult the relevant professionals to ensure the process is tailored to your business and the needs of the buyer. Corporate finance advisors will be able to advise you on potential ways to make changes or adjustments to the business in order to increase the potential value of your business, such as handing over supplier contracts to the buyer, and identify the optimum time to sell the assets or whole business to minimise losses.
Prepare the Relevant Consents
Prospective buyers of your business will scrutinise any issues that may obstruct the transfer of ownership of assets. As a seller, it is essential that you assess the feasibility of obtaining third-party consents before engaging with interested parties, as any issues that arise during the due diligence process may jeopardise the deal.
The consents required may include those from lenders, landlords, customers, and suppliers. For instance, if your business operates from a leased property, the landlord's approval will be necessary for the buyer to continue using the premises. Similarly, lenders' consent will be required if you have a secured loan.
To avoid delays, it is advisable to initiate conversations with these parties early on and to thoroughly check any legal documents to find out what can and cannot be done without the approval of the third party. Similarly, if the buyer is interested in continuing any ongoing business with third parties, then it is your responsibility as the seller to arrange this with the relevant party before the sale is completed.
Have a Deal Structured by Professionals
When preparing your business for an asset sale, it's crucial to consider the deal structure early on. Your corporate finance advisor, along with your legal advisor if necessary, can provide valuable guidance on this. One of the first topics to discuss is whether a business and asset sale, rather than a share sale, is the best option for your company. Once decided, there are various issues to take into account, and the buyer and seller usually enter into a preliminary agreement, known as "heads of terms," to outline key commercial and legal terms.
These heads of terms usually set out the basis of the offer from the buyer, which are intended to give the parties a clear structure of the deal before moving on to the next stage of the process. It is important to remember that, apart from any confidentiality or exclusivity agreements, most of the provisions of the heads of terms are not legally binding. Rather, they offer a clear understanding of the deal's outline and reduce the risk of the buyer trying to renegotiate later, which can be time-consuming and expensive for all parties.
Protect Your Business’ Confidentiality
Whilst your first concern is likely to be securing a quick sale, it is important to consider the effect this can have on your company’s finances and your employees. Throughout the valuation and selling process, it is essential that you maintain the confidentiality of the potential sale.
It is advisable to require potential buyers to sign non-disclosure agreements, as this will protect the business from any potential privacy leaks. Without this, potential buyers could share confidential information regarding your business operations or finances, which could benefit competitors or negatively affect your sale. Similarly, if a proposed sale is disclosed to your employees too quickly, then this can create concerns regarding their job security and negatively impact business productivity, as well as putting pressure on management to secure a quick sale and potentially part with business assets for less than they are worth.
Preparing an Asset Sale with BEACON
When arranging for an asset sale, or a full business sale, it is important to engage the services of experienced practitioners as early as possible to allow for more time to prepare and discuss the best options. If you are searching for an experienced licensed insolvency practitioner to guide your business through an asset sale, then the team at BEACON is here to help.