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Preparing to sell your UK business

by Brett Walker | Aug 11, 2016
  • There are many reasons to sell a business. Whether you’re emigrating or simply selling your concern to an interested buyer, you will need to give careful consideration to your reasons for doing so. In this piece I’ll explore some of the finer points on selling your UK business.

    Know exactly why you are selling

    When you put your business up for sale, potential buyers are going to scrutinise the reasons for your doing so. You will need to provide certain and decisive answers to their questions. Fully appreciating your motivations for the sale is the best way to provide these answers.

    Depending on what you wish to achieve by selling your business, you may choose to sell the whole operation or just a portion of it. This decision will likely hinge on your personal situation: Are you retiring? Do you have dependants? Do you wish to sell to your employees?

    Whatever the reasons, it is best to think long and hard about them. Once you are certain about why you wish to sell, you can figure out how best to put your business up for sale.

    The different ways to sell your business

    There are various ways to sell a business. The options available depend on factors like business type, size and sector. Most businesses are sold in a trade sale to another business - usually to one operating in the same or a related field.

    Business owners need to decide if they want to relinquish the entire company or just a part thereof. This will, to a large degree, determine how the business will be sold off.

    Partial sale

    Understandably, many business owners are reluctant to let go of the operation they have grown over the years. There’s nothing wrong this. In fact, selling part of your business while retaining a small stake in it may give buyers the assurance that you have confidence that the operation will remain a going concern.

    Full sale

    If you’re retiring, moving into a new industry or starting a new business, it may be in your best interests to remove yourself completely from a business.

    It may also happen that a private-equity buyer, private investor or larger competitor offers to buy your operation from you. In these cases, you’d likely need to make a decision based on what your financial and lifestyle outcomes would be following a sale.

    Sale of assets

    In cases where a business owner is selling primarily to ease a financial burden, he or she can consider selling some of the business’s assets. Equipment, intellectual property, customer lists and other non-liability creating assets are attractive to buyers who don't want to take on obligations.

    Getting paid in instalments

    Some business owners enter to agreements that allow a buyer to purchase the business in instalments. This can potentially put the seller at risk. If the business fails under new ownership, the buyer may not be able to pay the full price.

    In what is known as an “earn out”, some agreements require that the owner stays on at the company while the purchase price is paid in a series of payments based on the company’s profits.

    When to sell your business

    The state of your operation is the most important factor when you are trying to sell a business. Very few people will be willing to buy a business that shows no potential or is on the verge of going under.

    If your business is cyclical, consider when the best time to sell would be. Buyers often look for current profits as well as the potential for further growth in the medium- and long-term.

    Keeping plans of a sale confidential is also advisable. If word gets out that you’re planning to sell, your employees may become unduly worried about their futures. Being discreet will also minimise the chance of negative reactions from customers and suppliers.

    Reduce long-term investment

    It stands to reason that if you are looking to sell your business, you shouldn’t be making non-essential long-term investments for it.

    By cutting back on these types of investments, you should be able to maximise your short-term profits without jeopardising your company’s immediate or long-term future. This kind of refocussing will make your balance sheet look more attractive to potential buyers.

    Commit to the hand over

    Being active in the handover of your business will go a long way in putting a buyer at ease. While you are negotiating and setting the terms of the sale, be sure to show that you are willing to help with the handover of the business.

    Often, previous owners are asked to continue working at the company for a fixed period of time. This can help reassure customers, employees and suppliers that business will, for the most part, carry on as usual.

    Our team of business relocation experts can advise and help you if you’re thinking of selling your UK business. Email our team or give us a call on +44 (0) 20 7759 7584.

    We are a professional services company that specialises in cross-border financial and immigration advice and solutions.

    Our teams in the UK, South Africa and Australia can ensure that when you decide to move overseas, invest offshore or expand your business internationally, you’ll do so with the backing of experienced local experts.

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