Successfully Selling A Successful Business
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While the fundamental mechanics of conveying an asset from seller to buyer are the same, businesses are infinitely more complex than singular assets – like houses – irrespective of the price.
Just like selling a residential property, obtaining a successful sale – a smooth transition for a good price – takes a combination of luck, timing and careful planning.
1. What are you trying to achieve?
Bear with us here…
Before starting the sale process, you should identify your ideal outcome. Is your goal to simply obtain the highest price? Do you want to keep a role in the business after the sale? How do you want your employees looked after?
These are all fundamental questions you and your lawyer, accountant and business broker (“Professional Advisers”) will need answered to maximise achieving your desired outcomes.
2. What are you selling?
Business sales can involve various assets including, but not limited to:-
2. Intellectual property rights (trademarks, business names, websites, social media etc.);
3. Real property interests and/or the rights to occupy real property (such as a lease of your business premises);
4. Licences and contracts with suppliers; and
However, the method for conveying these assets can be done in two very different ways.
The first approach is to sell the assets that make up the “business” by having the legal entity which owns the assets (this could be an individual, partnership, company or trust) sell them to a buyer. The second approach is to sell the actual legal entity which owns the assets (for example, selling shares in a company).
Each option involves different legal processes and consequences. A business sale usually refers to the first approach.
3. Make the asset saleable
Being in a position to make your business attractive to prospective buyers can be as simple as tackling the list of things you have always intended on doing but put in the “not enough time” basket. This list may include:-
1. Internal audits – financial and strategic;
2. Improving financial credibility by tidying up and improving the presentation of your books and records;
3. Reviewing operating procedures, systems and processes to be documented and, where possible, automated.
4. For businesses with employees, addressing cultural issues.
5. If you are operating from a premises that contributes to the credibility and visibility of your business, check if any physical reparation is necessary.
Attending to these items well ahead of time will allow you to be in control of the business in an intimate way without the pressure of “needing” to sell in a rush.
4. Finding a legitimate Buyer
Given the time that it takes to deal with every potential buyer and, assuming they are astute and/or legitimate, it is important to have a screening process and prospectus of key information.
Your Professional Advisers can create a checklist of requirements for interested buyers. Meanwhile, your lawyer can ensure any confidential information is protected through an appropriately drafted non-disclosure/confidentiality agreement.
5. The Contract
Once you have found a legitimate buyer, your Professional Advisers will assist in negotiation and preparation of the Contract.
If the transaction is “simple”, you can use a standard form business sale contract with little to no amendments. However, if your sale is more complex, you will likely need your lawyer to draft bespoke provisions specific to the transaction.
While this can create another layer of complexity and cost, the risk of having a contract that is not fit-for-purpose can often be far more costly.
6. What will your lawyer be doing?
Typically, the seller wants to exit the business for a good price without the need to worry about ongoing issues or future liabilities. Your lawyer will be focusing on:-
1. Facilitating the legal transfer of the assets being sold; and
2. Protecting your future position and ensuring that you do not take on unnecessary liabilities after Settlement.
7. Who do I contact about Selling my Business?
For advice on business sales or purchases, contact Rhys Larsen and the team at WGC Lawyers on 07 4046 1111 and email@example.com.