You’ll only sell your business once so inevitably when the time comes you may well be unsure as to the process involved.

Getting your business ready for a sale can be a challenge in itself. If you’re ready to sell and have received an offer from a prospective buyer then you’re in a great position, but don’t underestimate what is to come.

Knowing what to expect can help keep the stress levels down as you’ll be able to effectively plan around the sale and focus on the day job. What might appear to be straightforward offer can still attract lengthy legal documentation and extensive due diligence. To give you an idea of what to expect, we’ve summarised the key stages (and points to note!) in the process below:

• You might receive an initial offer from your prospective buyer. The next step for a wise seller would be to draw up Heads of Agreement or a Term Sheet to enable you and the buyer to agree the key points of the deal early on. This will be subject to due diligence (see below) but will help everyone focus on the important points in terms of the structure of the deal, payment terms and indicative timetable. Negotiating a document that is perhaps a few pages long is much simpler than negotiating a significant Share or Asset Purchase Agreement and will keep the costs low (in the event that in fact a deal cannot be reached between the parties – at least you’ll find out at a fairly early stage).

• Once you have your offer the buyer will be looking to undertake a due diligence exercise to give them a better feel for your business. They will want to look at your key contracts relating to everything from customers, suppliers and employees to your trademarks and commercial property. There’s also the financial and tax due diligence to consider too. Before you let them loose you’ll want to make sure you have a non-disclosure agreement (or confidentiality agreement) signed to give you some protection, particularly if the buyer is a competitor in your market! Remember that whilst you may have an agreement in place you will be well advised to hold back sensitive commercial information until you are absolutely confident that the deal will proceed to completion.

• Being prepared for a due diligence exercise can also help keep the distraction to a minimum. Preparing for this before you have even entered into discussions with a buyer will give you time to get your documentation in order and tie up any loose ends.

• While the due diligence exercise is ongoing the lawyers will be preparing the paperwork to document the deal. Things such as warranties and indemnities will be included here to protect the buyer from any historical legal, financial or tax risks (as they will inherit these if they are purchasing the shares in the business). You, as seller, will be required to make any disclosures against the warranties if the statement of fact (which is what a warranty is) is incorrect. If the buyer does not like your disclosure they may want to agree a specific indemnity (your future promise to pay a sum of money in certain circumstances). The disclosure may prompt the buyer to ask for a day one price reduction. Alternatively the buyer may want to defer a deal until the problem area is resolved to their satisfaction.

• Don’t underestimate how long it can potentially take to negotiate the legal documentation. It could come down to as much as a small paragraph in a 50 page document that takes a few weeks to agree (particularly if relating to a warranty, indemnity or disclosure). But once everything is in final form and agreed, the deal can proceed to completion. There will likely be a raft of additional documents to be signed (such as board minutes, resignations etc).

• To legally transfer the ownership of the shares in a company the Stock Transfer Forms must be signed and stamped (with 0.5% of the purchase price payable to HMRC as stamp duty). Once this is complete and the transfer is entered into the Register of Members, the company will officially be out of your hands (legally!). There may well be a hand-over process agreed prior to completion and you might want to stay involved for as long as you can if any of the consideration is not payable at completion.

There is no typical timeframe – it could take anything from a month or two to over a year to sell your business so having trusted advisers on board before you have entered into negotiations could make all the difference.

For further information please do not hesitate to contact an Everyman Legal Solicitor on 01993 893620 or email everyman@everymanlegal.com