Selling my Business – FAQs

The team at Thorne Widgery are here to help. If you’ve got a question about your business or personal finances, you can bet that one of our experts will have the answer.

Below are just a few of the most frequently asked questions we receive on the subject of selling a business but if you can’t find the answer to a query you have, just get in touch and we’ll be happy to help.

Q: What do I need to be aware of during the initial stages of putting my business up for sale?

A:  A potential buyer will normally be required to enter into a number of initial agreements with the seller. It is important to seek advice on drawing up these documents and making sure that all due diligence requirements have been met.

A buyer may initially be required to sign a confidentiality agreement, which obliges them to keep all information about the business secret.

Q: What is a Heads of Terms document?

A: It is also common practice for businesses at this stage to set out the key terms of the agreement in a non-binding document, usually referred to as the Heads of Terms or a Letter of Intent.

This sets out the basic framework for a possible deal, including a time frame for completing the transaction and terms and conditions between parties, such as an appropriate exclusivity period, where the seller will agree not to enter negotiations with other potential buyers.

This document does not compel the parties to complete the transaction on these terms, or indeed at all. However it is taken as evidence of serious intent. It is therefore an important part of the process to ensure that it is right as it will often be referred back to, later on in negotiations.

Q: Should I consider a share or asset sale?

A: At this stage it is important for the parties to decide whether the transaction is to proceed by way of a share sale or an asset sale. Both methods have advantages for the respective parties and it is important that you seek advice from the team at TW.

Q: Why is due diligence so important?

A: Once the Heads of Terms has been signed, parties may continue with Due Diligence proceedings. This is the process by which the buyer will find out fundamental information about the business that they are purchasing. It will provide the foundations for final negotiations and allow a buyer to carry out all necessary checks into the business.

Q: What is a Purchase of Business Agreement?

A: This is the principle document which sets out the terms of the transaction. It will cover details including exactly what is being purchased, the price and terms of payment, warranting certain information about the business being purchased, and indemnities relating to any areas of concern for the buyer.

The agreement will also address property specifications, assumed liabilities and any restrictive covenants that bind parties.

Prior to the documents being signed, the board of directors of the seller and buyer should meet to discuss the terms. When documents are signed, this is sometimes known as ‘The Exchange’. The transaction may be completed the same day, although there can be a delay while certain requirements are fulfilled.

Q: When should I seek support from my accountant?

A: The short answer is as soon as possible and certainly before you make it known that you are considering selling your business.

We can arrange:

  • A full financial performance review
  • A review of all aspect, both positive and negative which could affect the saleability or valuation of your business
  • An estimate of current market value and possible valuations that could be achieved if certain performance changes or other actions are implemented
  • Advice on the best time to put your business on the market

Find out how we can help make your selling a business ambitions a reality – call us now for an informal chat.