Buying or selling a business or company is not something that even the most experienced entrepreneur undertakes every day of the week. Many transactions were put on hold following the crash of 2008, largely on the basis that finance had been difficult to obtain and investor confidence was low.
But, we can't stop the clock indefinitely - business owners get older, their expectations change and time marches on.
We have noticed an increased level of corporate activity this year, notwithstanding the challenging marketplace. In order to help owners wishing to sell and those wishing to buy, we have set out a few pointers which we hope will be helpful.
Thinking ahead
First of all, obvious as it sounds, know the business. A lot of time can be wasted because the seller does not have a grasp on each aspect of their business. This can disrupt the flow of the transaction and spook the buyer into wondering how well the business has been run. For a buyer, knowing the sector means knowing what to look out for in a potential acquisition and what to say in price negotiations. It also gives a grasp on what is important to keep that business profitable.
For a seller, making the business presentable is key, as this will affect the asking price. The buyer will want to see the insides of the business as part of the due diligence process. Having all your paperwork in order is important as it helps stop the deal from stalling before it has barely begun.
Decide whether the transaction should be a share sale or an asset sale. In a share sale, the buyer acquires the shares of the company, and therefore takes on all the assets and liabilities. In an asset sale, the buyer acquires the business from within the seller company and can cherry pick what it wants, but will need to have the contracts in the business assigned or novated to it, and will need to become involved in what is known as a TUPE consultation with employees. Due to recent changes to tax legislation, transferring the business to a new company and selling that company may, depending on the facts, be a good compromise between these alternatives.
Tax
Take tax advice. It pays to think ahead because some forms of tax structuring need to be put into place at least 12 months before a sale. Think about whether you want to incentivise key employees by enabling them to take a stake of the business - again, the earlier you do this the better.
At Lupton Fawcett, we are always happy to have a no obligations chat with anyone looking to buy or sell a business and can give specialist tax advice. We cover the whole spectrum of legal services. Visit us on: www.luptonfawcett.com or call us on 01132802000 for Leeds or 0114 276 6607 for Sheffield
For further information or advice, please contact Andrew Lindsay, head of the corporate finance team at Lupton Fawcett LLP on 01132802025 or andrew.lindsay@luptonfawcett.com or Joss Richardson on 0113 280 2028 joss.richardson@luptonfawcett.com
Andrew Lindsay
Andrew Lindsay joined Lupton Fawcett’s Corporate Finance Department as a director in May 2011. He is a well known legal adviser to businesses and companies in the York and North Yorkshire region, where he previously practised as a corporate lawyer for 20 years.
Tel: 0113 280 2025
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