Selling Your Business – What information do you need to complete the transaction successfully?
Business owners must take care to ensure that they do not destroy value in their business by allowing things to go wrong at the very start of the sale transaction. There are some simple steps that can be taken by a seller to ensure that risks associated with a business sale contract are minimised.
Have you noticed that when the day starts badly it can be difficult to turn things around? You might not be surprised to hear that when things go wrong early in a business transaction it can be difficult to get the process back on track. It is wise therefore to invest some time, early on, making sure that you understand the process, on which you are embarking. Like first impressions, you don’t get a second chance.
We have recently reviewed our business sale processes. As part of this review we have documented each of the routine steps in a business transaction and have identified the kinds of things that can go astray at each step. At an early stage we provide our clients with all the rules of the transaction and a spread sheet setting out each step, in order. This is often more information than is needed by a seller but, a clear understanding of how the process will unfold, helps keep all parties working together on the common objective.
Levels of frustration rise very quickly when things start going wrong and when that happens points of difference in negotiations become impassable. We jave set out below a list of matters that need to be made ready so that a sale proceeds smoothly.
Business sellers can play their part in ensuring that the transaction has a good start. Accounting information must be up to date. Get a good accountant and have that accountant prepare your records for sale. Ask your accountant to scrutinize your records as though they were buying your business. Suspicion grows in the vacuum created by missing and incomplete accounting records. The due diligence process will leave a bad taste in the mouth of a buyer, who has invested time and money, only to find that records are not up to standard and so cannot be trusted.
Once the business is ready for sale make sure that you can also produce the kinds of records that your lawyer will need. We ask our clients to have the following information ready:
- The name and contact details of your accountant
- Details of all employees of the business and the dates on which they commenced their employment. (Calculations of entitlements will also be required)
- The full details of the owner of the business. Often a company and or a trust is involved. The company or trust documents will be needed.
- Details of any financial and other information that was offered to the buyer, by the broker, in any pre contractual negotiations.
- Copies of any leases relating to the premises of the business including amending documentation e.g. extensions and variations.
- Details of the current rent and outgoings paid to the landlord, the period for which those sums are paid and the date of the last payment. Including supporting documents.
- Copies of any licenses which are required to operate and details of the authority that issued the license
- Copies of any franchise agreement associated with the business and contact details for that franchisor
- Original registration details for any vehicle sold with the business. ( at some stage a vehicle safety certificate will also be required )
- A list of any leased equipment and contact details of the lessor of that equipment.
- A list of all plant and equipment sold with the business including details of any encumbrances
- If the seller is a company, details of any charges registered over the company.
- Details of any bills of sale registered over the assets of the business.
- If there is any finance arrangement relating to the business, the name of the bank involved and the details of the bank office to contact.
Providing this information to your lawyer at an early stage will allow your lawyer to respond quickly and efficiently to the buyer, leaving no room for your buyer to doubt how well both you and your business are organized.
Riba Business Lawyers
Strength Through Knowledge
Franchising, Leasing, Acquisitions
Head office: 34 Duporth Avenue Maroochydore
Maroochydore: 07 54791488