It is important to identify and consider relevant individuals’ different priorities at an early stage as part of the transaction planning. Remember that you are choosing a business partner, which should be thought through carefully to ensure the right fit
Preparing your business
Any investment or sale will involve due diligence being conducted on your business and your giving various warranties about its condition. Consider early whether there are any issues and assess the potential impact on the process with your advisers, for example as a result of particular market concerns such as pension transfer advice.
Where there are particular issues, indemnities will likely be requested under which sellers agree to cover the relevant liabilities. It is not unusual for indemnities to be requested in respect of broader compliance with regulation during the period prior to the transaction completing.
The historic tax compliance of the business will also be an area of focus. Taking the time to review your track record and tidy up any loose ends with your advisers is key, particularly as purchasers will typically expect the sellers to provide a tax indemnity, ensuring they remain on the hook for any historic tax issues that arise unexpectedly post-sale.
First impressions count, and a well-ordered and comprehensive presentation of information will give potential investors or purchasers confidence in the business and how it has been run, helping both the valuation and likelihood of closing the transaction on favourable terms. Consider whether contracts are complete, registers and books are up to date and available, and that you can demonstrate compliance with regulatory requirements.
Taking advice early
Advisers who know the market well will be able to support you through the process, help you prepare, find the right investor or purchaser and achieve the right value and terms.
Taking advice early can also provide additional tax and estate planning options, some of which we consider farther below.
Notwithstanding the process, ensure you seek advice from your advisers before agreeing any terms. While heads of terms are typically non-binding, they can contain traps for the unwary, be used to raise important areas of value early on, and set the course for the transaction.
Timetable for the transaction
Be prepared for distractions from running your business. Typically, following any auction or other process to identify the potential investor or purchaser, heads of terms will be entered into and a period of exclusivity granted to agree and sign the transaction documentation.
