Buying a business takes time. This can be frustrating when you are keen to embark on a new venture as soon as possible. With a view to minimising unnecessary delays and to aid a smooth purchase, the following tips may help you in the early stages of negotiation with your sellers and preparing for your purchase.
Consider the timescales. Agree a realistic timetable with your sellers having first taken advice from your solicitor and accountant as to how long the purchase will take. Whilst you will be keen to get going as soon as possible, there are likely to be some technical issues to resolve before the sale can proceed. A realistic completion date with phased target deadlines also allows you to plan for your business more effectively.
Meet the sellers and agree a written list of assets i.e. what is and is not included in the sale. Ask the sellers if they own all the equipment themselves or whether any items are leased or hired from a third party. If assets are subject to third party rights, you will need details of these items as soon as possible.
Do you want to buy any stock at completion? Discuss with your sellers what they envisage will be left to transfer at completion and whether a stock valuation post completion will be required.
Property issues need to be clearly understood at the outset. Ask the sellers if they will be selling the freehold of any premises or if not, obtain details of the lease, even a copy if you can. The property element of a purchase (if there is one), will form a large part of the paperwork your solicitor will need to deal with. The earlier full information is obtained the better.
Goodwill and Intellectual Property Rights may form a big reason for the purchase. If you require exclusive rights to take over the business name or branding rights you may also want to restrict the sellers from competing locally in the same line of business.
Ask the sellers about the contracts and suppliers they have in relation to the business and request details as early on as possible. Clarify the liabilities and the benefits of these and decide whether you would like to, or indeed are able to, take these over.
If you are taking over a business with employees find out as much detail about employees of the business as you can. There are some very strict rules about the transfer of employees so it is important that the parties’ intentions are clear about their transfer at the outset.
How will you fund the purchase? If it is from a bank, let your solicitor have details as soon as possible so that they can liaise with the bank to satisfy their requirements. Ensuring a swift drawdown of funds may prove vital in pushing the deal through.
Lastly, as the buyer you will need to consider how to structure your purchase. You may want to seek an ‘asset purchase’ so that you can cherry pick the assets included in the purchase and exclude the assets or liabilities you do not wish to acquire. For some businesses, for example those in which certain licences are held in the name of a company, it may prove best to opt for a ‘share purchase’ but with a share purchase there is heightened risk as you acquire the company’s entire history, lock stock and barrel. For either option, tax advice will be an influence in your decision so a tax input from an accountant will also be needed as soon as headline terms have been agreed.
There are other issues to consider but on the basis time is one of the main reason deals fall through, it is best practice to make a head start on your purchase where possible to do so.
Grant and the other members of the Commercial Team at AMD Solicitors offer further advice and information upon buying or selling your business (including a free first half hour consultation).
Email firstname.lastname@example.org or telephone 0117 9733989.
AMD have offices in Clifton Village, Whiteladies Road, Henleaze and Shirehampton.
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