A guide to selling your business

COVID-19 has changed the way many business owners view their future.  It may have taken many years of hard work to build up and establish a successful business but the strain of the last year or so and desire for more time with the family has pushed many owners into the decision to sell.

Selling your business can be a complicated and often laborious process.  It is important to have the required legal documents drafted by an expert to ensure adequate cover whether you are a seller or a buyer.

There are several stages to complete to ensure the transaction can go through as smoothly as possible, here is a summary of them and an explanation of each stage:

  • Confidentiality Agreement
  • Letter of Intent/Heads of Terms
  • Due Diligence
  • Sale Purchase Agreement
  • Disclosure

Confidentiality Agreement/Non-disclosure Agreement (“NDA”)

Make sure you have a professionally drafted NDA or Confidentiality Agreement in place prior to discussing sale details so that you will feel confident in divulging confidential information earlier in the process.

Letter of Intent/Heads of Terms

This sets out detailed terms of the sale and confirms both parties’ intent and commitment to conclude a sale.

Due Diligence

Your buyer’s due diligence and warranty protections serve to ensure exactly what a buyer is buying and should reveal any arising issues.  The buyer is likely to request sight of the business accounts, both historic and projected financial performance, asset and property valuation, legal and tax compliance along with trademark, copyright and IP/patent protection.  It is important to review your contracts, including employee contracts, operational policies and statutory records to ensure maximum price is achieved on the sale.  Ideally, resolve any outstanding disputes and/or legal proceedings to avoid delay in the transaction process or the Buyer attempting to renegotiate a lower price.

Ensure you take professional advice when answering your buyer’s due diligence questions in case you are later asked to warrant that your responses were true and accurate.

Sale Agreement

The sale agreement sets out the sale price – make sure you are aware of how your buyer plans to fund the purchase, consider their position and try to anticipate any likely finance hurdles – it may be that in the current climate you have to be flexible about payments being made in instalments over a longer period of time.

Some form of deferred payment is often put in place – either as fixed instalments or in the form of an earn-out – being a top up payment payable to the sellers if the company’s turnover achieves previously agreed targets after the sale. Be aware that as earn-outs depend on future goals they ought not to be considered as a guaranteed receivable – COVID-19 has taught us that nothing is certain.

The buyer’s warranty protection will cover all aspects of your business, e.g., Tax, Employment, Contracts and Health and Safety liabilities and gives the Buyer an ability (via contractual claims) to clawback amounts paid to the sellers or adjust the deferred payments due after the completion date.


Skilled negotiation of the warranty/indemnity wording and drafting of detailed disclosures by the seller’s solicitors will serve to protect a seller from future claims.

Involve your solicitor and accountant as early as possible, make them aware of your short and long-term plans.  Explain why you want to sell and the goals you’d like to achieve – this will enable your advisors to gain an understanding of what really matters to you and to work together to advise you on tax, accounting and legal aspects.

If you are considering selling or buying a business and would like to have an initial chat, please call Anneka Traynor in our Corporate & Commercial team on Bolton 01204 527777, Blackburn 01254 268790 or email atraynor@kbl.co.uk