Why would someone want to buy my business?

How many of the following apply to my business?

• We have strong growth prospects
• We operate in a valuable niche sector
• We sell premium goods/services
• We have developed proprietary technology and know-how
• Our business model is scalable in the right hands
• We have sustainable profit margins (which could grow in the right hands)
• We have impressive and motivated second tier management
• The business does not just rely on me
• We have talent in the areas that matter most to the business (e.g. R&D, sector know-how, business development, client fulfilment, sales)
• We have a strong reputation and high profile within our sector
• We have a good spread of quality, growing clients
• We have a good record of generating new business from good, scalable clients

What would put someone off buying my business?

How many of the following apply to my business?

• We are over-reliant on small number of mature clients
• We spend too little time winning and developing new clients
• Our revenues and profit margins have levelled off or fallen
• There are low barriers to entry into our market
• We commonly win new business by undercutting our competitors
• Too much of the business revolves around me, my contacts and my business development skills
• Our business isn’t particularly niche or innovative
• Our market isn’t growing much
• My star employees have little incentive to stay with the business
• My financial information is limited in its depth and scope

Who might want to buy my business?

• The competitor? Some looking for a complementary fit with another player in the sector
• The consolidator? Our market is consolidating and we could add value to
• The buy and build player? We could be a useful bolt-on for a business looking to expand into our market
• The overseas buyer? We could be a good strategic fit for an overseas buyer
• Private equity? Our growth prospects and market position could attract private equity (or even support an AIM IPO)
• The management team? Our strong and ambitious management team might be able to find backing for a buy out

What does my financial data look like?

The first thing any potential buyer will do is scrutinise your financial information.

• Do I have good quality financial information prepared to the right level of detail?
• How reliable and detailed are my monthly management accounts?
• What are our business KPIs? Does my financial information record and measure them?
• Are any of my accounting policies a bit questionable?

Will I be in a position to sell tax-efficiently?

• Will I qualify for Entrepreneur’s Relief? Could my wife/husband?
• How will a sale affect my inheritance tax planning?
• What are the tax implications of not getting all the sale proceeds up front?
• Do I have a share option scheme in place? Is it tax-efficient?
• How do share options work on a sale?
• Will any of my shareholders benefit from EIS or SEIS relief?
• Are any non-employees holding shares?
• If so, do I need to get their shares back?
• If so, do my articles/shareholders’ agreement allow me to do so?
• If so, at what cost?
• Are there any shareholders who might not want to sell?

Risky business?

• What aspects of my business keep me awake at night?
• Are my contracts in writing and accessible?
• Are any of my key agreements on unwritten terms?
• Which of my contracts could be terminated on short notice?
• Have I completed all my intellectual property registrations?
• Is my business data protection compliant?
• Do I have adequate insurance in place?
• Do my employees have up to date employment contracts?
• Do they contain properly drafted and enforceable restrictive covenants?
• Do I have a proper employee handbook and do I keep proper HR records?
• Am I compliant with the latest rules on pension auto-enrolment?
• When did I last carry out an IT audit?
• Do I have an IT disaster recovery plan?
• Am I up to date with my taxes (PAYE, NICs, VAT, corporation tax)
• Does the company own all the assets it needs to operate the business?
• Am I up to date with all our corporate filings?

How will I find a buyer?

• Increasing your public profile can attract interest
• Trade press and websites might feature potential buyers and investors
• Attend some mergers and acquisitions (M&A) seminars and workshops
• Speak to owners who have been through the sale process before
• Get to know some M&A advisers who understand your sector
• If you don’t know any M&A advisers, ask for some recommendations from your accountant, lawyer, bank or business angel network
• Get two or three M&A advisers to talk you through: the sale process; how businesses are commonly valued; different sale strategies
• Don’t sign up an M&A adviser without getting independent advice on their terms of engagement

This is intended to provide a first point of reference for current developments in aspects of the law. It should not be relied on as a substitute for professional advice. If advice on a particular circumstance is required please contact one of the lawyers listed below.