Business sales & purchases

We have a specialist, highly experienced team of commercial and business lawyers in London to assist with any business purchase or sale. Our experts can advise and assist you, in a cost effective way through the entire purchase from negotiations through to due diligence, and on the full range of possible business law contracts whether you are buying or selling assets or a company.

Our business lawyers and solicitors in London advise business buyers and sellers and in relation to transactions and businesses of all sizes. The below general guide on business purchases and sales is intended for general assistance only, is not legal advice, and relates to some of the main issues which may arise. Please contact us for more specific advice and an immediate, no obligation quote.

1. Practical matters

Buying or selling a business is a stressful and high importance matter and having the right business law firm representing you can be paramount to the success or failure, risks and reassurance available. It is important that a commercial law firm retained by you is precisely that, commercial ! What this means is keeping the cost and documents to a reasonable and cost effective extent and focusing on key points and enquiries. The fundamental points for consideration are generally :-

(a) Share Sale or Asset Sale ?

The above consideration will only apply if you are buying or selling a company, but assuming you are, there are numerous considerations to be taken into account when deciding which of the above is best. These considerations usually revolve around tax issues, but other factors can also be relevant. Buyer and seller may well have different requirements and advantages/disadvantages on this issue, so it needs to be resolved at the outset.

(b) Legal Documentation

Whether the sale is of shares or assets it is in both parties interests to have a share sale agreement or asset sale agreement. From a purchaser's point of view, the key issues are ownership of shares or assets, power and authority to make the sale, possible liabilities, employee issues, intellectual property, guarantees or warranties and for both buyer and seller there may be tax implications of the deal immediately and in the future.

(c) Warranties and terms for payment

Warranties are a difficult area and one of the areas in the contract where disputes, delays and costs can, if a commercial and practical approach is not adopted by both parties and their lawyers, mushroom. Warranties are factual assertions about the business, it’s performance, assets, liabilities and litigation, given by the sellers to the purchasers in order to give the purchaser comfort that matters relating to the business are as stated, and buyers generally like such comfort as personal responsibility and liability usually attaches to the sellers as individuals on an ongoing basis, generally for a fixed period post completion of the transaction. For the same reason, sellers generally seek to avoid giving such warranties and will argue that warranties are unnecessary if the buyers and their advisors have undertaken due diligence. Matters can also be complicated if the buyer requires bank finance for the purchase as the buyer’s lenders may have their own advisors and the bank or it’s advisors can be quite inflexible as to requirements.

Warranties can be extensive and wide ranging and can run to 50 or 60 pages ! This is a prime example of where experienced, practical, specialist business purchase or sale solicitors add real value. A transaction worth £50,000.00 needs to be treated differently, and proportionately to a transaction worth £50,000,000.00. If  warranties are breached, the purchaser can sue for the damage he suffers as a result of the breach.
With an owner managed business a purchaser will often want to tie the seller into the business in an advisory capacity for a year, two years, and in some cases longer, to enable a handover period to ensure the seamless transfer and growth of the business. There can also be earn-out provisions in such cases such that if the business continues to perform for the period of the earn-out, the seller receives further money, but at the same time the purchaser is protected in that if the business fails to perform he ultimately pays less for it. Deferred consideration is another mechanism that purchasers often use to protect themselves. The purchaser may be concerned, if all the consideration is paid at completion, that he will later find the vendor is hard to trace, leaving the purchaser to deal with anything that he sought to protect himself against in the warranties, himself.

Therefore, a useful mechanism can be deferred consideration, whereby a certain amount is paid upfront and the rest over a period of time (usually the warranty period). Other mechanisms that can be used would be to have part of the consideration paid into an escrow account managed by both parties or their lawyers as security for the warranties.

(d) Other documents which may be required

• Leases and property related documents
• tax deed
• board minutes for companies (possibly buyer as well as seller)
• company resolutions
• service agreements (if seller staying on in the business)
• releases from guarantees and debentures
• bank guarantees

(e) The status of existing employees of the business sold

This topic generally relates to an area of statutory law known as the Transfer of Undertakings (TUPE) Regulations concerning the status of employees of the business being sold. The buyer or seller can both potentially be sued by employees who lose their jobs as a result of the sale and purchase, even if only part of a business, or certain assets, have been sold and not the entire “undertaking”. For specific advice on this aspect, please consult our specialists and see further the specific page on TUPE in our website.

(f) Timing/conclusion

• Instruct lawyers who are experienced, cost effective, practical and commercial, and above all, that understand you, your business and proportionality on documents and costs !
• Expect the transaction to take between 6 weeks and 6 months, again depending on the value and complexity
 
Selling your business is an extremely time consuming and laborious process, and it is therefore absolutely essential that you plan for this well in advance to make it as painless as possible. This of course is extremely important in keeping the business running whilst the negotiations take place. In our experience, negotiating a sizeable company sale will take at least a month, and in most cases two to six months. Whilst not intensive at all times, there are likely to be at least one or two weeks where key personnel in the business will need to be available to their professional advisers either by telephone or attending meetings in order to ensure that matters are dealt with and that negotiations run effectively. It is therefore important that you plan your resources carefully to ensure that the continuity of the business is not affected.

 
Print pagePrintable Version