Selling a business

I’m a solicitor who specialises in buying and selling businesses, and I act for the owners of owner-managed companies who are selling, usually for somewhere between £250,000 and £10m. If that’s you, you’ll have worked hard for many years to build up the business and you know your industry inside out, but you’ve probably never sold a business before. You’re a smart cookie, but need some help with the legal side of things, and that’s where I come in.

This page is about selling, but I act for buyers as well and there’s a separate page on buying a business.

Who I act for

My typical client is an owner, or a small group of shareholders, who has a buyer lined up or is close to having one. My ideal client is not a mega-corporation but a business owner or director who would really value excellent legal advice, great service, personality and fixed fees, and who wants the documents explained in plain English along with a view on which points are worth arguing about. Is that you?

I deal with all of my matters myself from start to finish, so you have direct contact with me and aren’t passed down to a trainee. I’m a consultant solicitor, and all of my legal work is carried out through Nexa Law Limited, which is authorised and regulated by the Solicitors Regulation Authority.

In the last few years I’ve helped buy or sell a £7m plant hire business, a £4m medical services company, a £3m lighting business, a £1.6m debt collection business, a £1.4m haulage business, a £1.2m security company, a £1.1m sheet metal business, a £900,000 alarm business, a £450,000 facilities management company and, at the smaller end, a £30,000 accountancy client book, plus others.

Whoever you instruct, do not just use the person who did your will or your conveyancing a few years ago. Not all solicitors are created equal, and selling a business is specialist work which needs someone who does it regularly. I’ve written more on whether you need a solicitor to sell a business at all.

How selling your business works

A business sale usually takes two to three months from agreeing terms to completion, although it can take longer, and it will usually go through four stages.

The first is the heads of terms, which is a short document recording the price, how and when it’s paid and the main conditions. Most of it isn’t legally binding, but everything that follows is based on it, so it’s worth getting advice before you sign.

The second is due diligence, where the buyer’s solicitor sends a long list of questions and document requests, you upload what you have to a data room and I review the replies before they go. This is the stage that takes up most of your own time.

The third is the sale agreement, which is negotiated alongside due diligence. It contains the price mechanics, the warranties (which are your promises about the state of the business), the limits on what the buyer can claim from you afterwards and the restrictions on what you can do once you’ve sold. With it comes the disclosure letter, which is your main protection against warranty claims and so needs to be prepared carefully.

The fourth is completion, when the documents are signed, the money is paid and ownership is transferred.

At some point during all of that you’ll also need to think about when and how to go about telling your employees.

Share sale or asset sale

There are two ways to sell. On a share sale the buyer takes over the company itself with everything in it, and the main document is a share purchase agreement. On an asset sale the company (or you, if you’re a sole trader or partnership) sells the business and its assets to the buyer, and the document is an asset purchase agreement. Sellers of companies generally prefer a share sale and buyers sometimes prefer assets, and I’ve set out the differences in share sale v asset sale.

Some sales work a little differently and I act on those too, including a management buy-out, where the buyers are your own team and you’re usually paid over several years, and sales in sectors where a regulator or a franchisor has a say in who can buy.

What selling a business costs in legal fees

I work on fixed fees, with a written scope of work agreed before I start, so you have certainty about how much you’ll pay. I don’t work on hourly rates or estimates, and I would urge you to stay away from any solicitor who can’t give you at the very least a capped fee.

Every quote is specific to the deal, but as a guide my fee will be between 0.5% and 5% of the deal value. Under £1m it’s usually 3% to 5% and over £1m it’s usually 1% to 2%, although it does depend on the business, the price and the commercial terms. The minimum fee is £3,500 plus VAT, and on lower value deals I can quote for a reduced, more standardised service.

That level of service isn’t cheap, and I don’t price match other solicitors, as the lower quotes are usually for a lower level of service. I will usually be cheaper than the ‘proper’ commercial firms though (those with glass-fronted offices, a Legal 500 ranking and a coffee menu… you know the ones). If you’re shopping around, ask each solicitor for a fixed fee and a written scope so that you’re comparing the same thing, and I’ve written some tips on comparing quotes on solicitors’ fees. It’s also worth being reasonable about the budget, so if you’ve agreed a £75,000 fee with your business broker but only want to pay £8,000 to your lawyer then you’ll need to readjust your expectations.

What isn’t covered

I don’t value businesses and I don’t give tax advice. Valuation is something for a corporate finance adviser or your accountant, and how the deal is taxed is for your accountant, although I work alongside both.

My standard fee covers the sale of one company under English law. Property work (such as a new lease or a freehold changing hands), subsidiaries, anything governed by another country’s law, warranty and indemnity insurance and escrow arrangements are outside it, and are quoted separately if the deal needs them.

If the sale is still a year or two away

If you don’t have a buyer yet, the most useful thing you can do is to find out what a buyer’s solicitor is likely to find and fix it now, while there’s no deadline. That’s what exit planning is for.

Next steps

Whether you’re selling the shares or the assets, or you just don’t know yet, send me the details (what the business does, roughly what it’s selling for, whether heads of terms are signed and who the buyer is) and I will tell you how I can help and what it will cost. Do get in touch.