A partner at a leading Midlands law firm has urged company bosses to do their research – and take their time – when they decide to sell up.
James Sage, lead partner in the Corporate Department at FBC Manby Bowdler, says too many limited companies run into unforeseen problems over their sale because they fail to plan well enough in advance.
Mr Sage said businesses could choose between a share sale – where shareholders sell their shares in the company that owns the trade and assets of the business – or an asset sale, where the company sells some or all of the assets which comprise the business.
“Whichever is chosen will be influenced by personal, financial or legal reasons, but the final decision will determine the process to be followed and the resulting tax implications for both buyer and seller.
“It is vital to take the time to plan whichever course of action is decided upon and to make sure you call in specialist advisers to help navigate the business through the sale.
“Whichever of these two routes is finally decided upon, the management team need to be sure that contracts and policies are all in order, and that any disputes or other issues have been resolved.”
Once the company is ready to go on the market, a non-disclosure agreement (NDA) for potential buyers should be put in place and confidential information must be withheld from any interested parties until the NDA has been signed.
“Once a deal has been agreed, buyers should be credit checked and their source of funds validated. If those pass the test, then set out the terms at an early stage of negotiation. The sale price is important, but it’s not the only thing that matters. Getting a clear document setting out the heads of agreement can influence the way the transaction progresses and means everyone knows what is expected of them.”
Mr Sage said that a clear timetable setting out key aspects of the sale and what it included should be drawn up.
“At each stage, the most important thing is that all members of your advisory team are working with each other in a seamless way throughout the process, as well as directly with you. Where the ground shifts, as it inevitably will, it’s important they remain focused on the vision you have for the company sale, and work with you to achieve the best possible outcome in changing situations.”
Mr Sage has considerable experience in advising owner managed businesses in the manufacturing sector and also acts for banks and other lending institutions.