A simple list to help you (and your buyer) hit the ground running
If you’re thinking about selling your business or you are already in talks to do so, it is helpful to be prepared. The sale process becomes considerably easier if you have the answers and supporting documents in the list below.
This preliminary process is known as due diligence. Depending upon the size and complexity of the business this process can take some time to complete but get it right and it will speed up the process.
The checklist below includes some of the things you need to think about before selling your business.
A/ Do you have the authority and or do the shareholders/board have authority to sell?
B/ Do you require the consent of any shareholders or banks to sell?
C/ Is there a shareholders agreement in place – if so what does it say about the sale of shares?
D/ Have you considered confidentiality? Do you need any confidentiality agreements in place to protect key contracts that may require this or to simply protect your business?
E/ Are your company books/accounts in order?
F/ Are you up to date with all filings and tax returns?
G/ Do you need any consent concerning any financial agreements?
H/ What are your company/business assets?
I/ Does the company own all its assets or are there loans outstanding on any such assets?
J/ Are there licences in place for any assets or trading activities and are these licences valid?
K/ A list of contracts and review of terms may be required (i.e. termination in the event of a change of control).
L/ Will any of these contracts continue following the sale?
N/ Copies of all maintenance, hire purchase, lease or commercial agreements?
O/ Do you have a lease in place for the company premises?
P/ Can you provide details of the company business rates/rent service charges?
Q/ Can you provide the details of all insurance policies?
R/ Who owns any Intellectual property rights? (patents, trademarks, copyrights, designs) and or domain names?
S/ A redacted list of employees, their salaries and terms, copies of all contracts of employment and schedule of terms will need to be available.
T/ Are the company employees to be retained following the sale?
U/ Who are the key employees any buyer would expect to see retained?
V/ Do all the company employees have employment contracts?
W/ Do the employees need to be informed of the potential sale of the business?
X/ Details of the company pension schemes / policies will need to be provided?
Y/ Will you sell the business by a share sale or an asset sale?
Z/ Tax advice
This may seem like a lot of points to consider, but if you can answer the majority or all of the above, this will put you in a very favourable position when you come to the sale of your business. It will also make you more attractive to potential buyers who can have confidence that core documents are available which can only have a positive effect.
Conversely if you are thinking of buying a business this same list can be used as a guide as to what you should be seeking from a seller.
Part 2 in the next edition – the process itself of selling or buying a business.
Sean Callaghan – BTMK
Gary Raven – Barrons