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What to expect during the process of buying or selling a business, is something we get asked all of the time as business brokers. If someone has never bought or sold a business before it can be a very daunting task to deal with. At Signature Acquisitions, we are here to help you through the process. The purpose of this article is to provide you with some helpful tips and explain what to expect during the process. That’s not to say nothing will go slightly wrong or different to this, but in general this is how things work when it comes to buying and selling a business.
Business listed for sale
If you have read our last article you will have already done all your homework to make the sale of your business go as smooth as possible once you’ve made the decision to sell. But what to expect during the process for buying or selling a business is the next step. Once all of those tasks are completed your business will be listed for sale and once this has been done interested parties can enquire and at this time, you can decide whether or not you’d like to engage with them and send the information across once an NDA has been signed. Once they have the opportunity to review and consider all of this and had their accountant look over the information as well, they may wish to meet face-to-face, which we will happily facilitate to ask further questions, and hopefully make you an offer.
Letter of intent
Once an offer has been made and you have accepted, our recommendation to both parties is that a letter of intent is drawn up from the buyer and is sent over to the sellers. This is not legally binding but is incredibly helpful so both sides have an idea of what is being agreed to. It is also a good show of how serious the buyers are. The process of buying and selling a business can be a lengthy one so having a letter of intent can be another way in which to keep things moving along. This document will set forward a couple of things, but not be limited to:
These are all the things you need to be thinking about and putting into a letter of intent, having your lawyer/advocate help to write this out will make the whole process a lot easier.
Once a letter of intent has been sent, signed and returned a deposit can be agreed and transferred across to your bank. This depending on what the buyer and seller have agreed can halt any further discussions between other parties while the due diligence is being performed.
This step is most definitely the lengthiest of the sale process but one of the most important so don’t be worried either as a buyer or seller if this stage takes some time. Of course, saying how long this takes is like saying how long is a piece of string! It very much varies dependant on the company but its always an incredibly important step to do properly.
In this stage expect a few things to be asked of you as the seller:
Its important that you are willing and able to allow access to all of this information and why it’s vitally important to have everything organised before you decide to put your business up for sale or it will only prolong the due diligence period.
Final SPA Sale & Purchase Agreement
The letter of intent that had been agreed earlier is a good base to start from when going over what you want in a sale agreement however this part should be fully discussed with your lawyer/advocate to agree on. You want the sale agreement to be fully airtight. Don’t leave anything to chance no matter how small it may seem to you. This is why it’s so important to have a good lawyer/advocate already sorted out before.
In the Final agreement you will have decided a time frame for when the remainder of the payment will be made and when the hand over process will begin. The payment may be done over a few payments or all at once depending on what you have agreed.
Dependent upon the agreement that has been set out, the finish line or end game may be more spread out if the seller is staying on for a handover period and/or the payment is being spread out. But as the seller you now have handed your business over and as the buyer now have your new business to run.
Disclaimer – all business sales are different this article looks over the main ways in which a business sale occurs but this does not always occur. You should always seek out and use a lawyer when looking to sell your business.