Selling your business
For many business owners, selling the company they have spent years building into a success can be the biggest business decision they will ever have to face. In order to achieve the business' full value, the owners must understand the legal complexities of the sale.
Ian Liddle, commercial law partner at Farleys Solicitors, discusses some of the issues business owners will have to consider if they are planning to sell their business, now or at some point in the future.
It is becoming less common for businesses to be passed down to the next generation of a family, instead, management buy outs (MBO) (where the company is sold to existing management), or a management buy in (MBI) (where a third party buyer purchases the company), are now the most common ways of selling a business.
The value achieved through a sale to an MBI is generally higher than to an MBO but there is more uncertainty involved in an MBI for the seller and existing employees who may question their job security with a new management team coming in. There is also a higher risk of confidentiality being breached if an MBI falls through at the last minute.
Business owners will have a figure in mind that they would like to realise through the sale of their business in order to achieve their personal aspirations. In most cases the value of the business will match the vendor's hopes, but if it doesn't, the vendor must discuss if there is any way of increasing the value of the business or if their valuation is unrealistic.
Sellers should have a well planned exit strategy in place well before they are planning to sell the business in order to maximise the value of the business. The best time to sell a business is when it has entered a period of growth and has further growth opportunities available to it.
There are a number of pitfalls associated with selling a business, but the most fundamental being not using the right advisers to assist you. Negotiating the sale of a business is a legally complex and time consuming process, so it is essential to appoint legal and financial advisers you trust at an early stage of negotiations.
Many business owners fail to plan for a disposal and aren't doing all they can to maximise the value of their business. In order for a business to be bought for a good price, it must have a track record of growth and you must have dealt with any potential issues which may have an adverse effect on the value of the business.
It is in the seller's best interests to ensure the business continues to deliver on its potential throughout the sale process, by focusing all of their energies on the running of the business, and leaving the sale in the hands of professional experts.
Although no amount of forward planning can prevent unexpected problems arising, business owners stand the best chance of securing a good value for the sale of their business by appointing professional advisers they trust and can rely upon to deal with the paperwork needed to sell their business.
For advice on selling your business, contact Ian Liddle on 01254 229 826, or Contact Us.
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