Exit readiness review: is my business ready to sell?

If someone made you an offer for your business tomorrow, the real test of whether it’s ready to sell would be whether the deal got through the buyer’s due diligence without the price changing.

In the exit readiness review I go through the business as a buyer’s solicitor would, before a buyer is involved, and tell you what they’d find. It’s the starting point for exit planning.

I should say that this is a new service. I’ve only recently put it together as a fixed-fee product and I haven’t delivered one yet, so I can’t point you to past reviews. It’s based on 18 years of acting on business sales and on the issues that buyers’ solicitors raise in due diligence.

Who it’s for

The review is for owners who expect to sell in the next one to five years, and whose business is big enough that a buyer will carry out proper due diligence and won’t simply take things on trust. It’s also for owners with no fixed plan who’d like to know where they stand. If heads of terms are already signed then it’s too late for a review, and what you need is for me to act on the sale itself.

What I look at

The review covers the same ground as a buyer’s legal due diligence, because that’s what the business will eventually be measured against.

I start with the company itself, which means the articles, the share capital, the register of members and the filing history, and I’m looking for anything that would stop you showing clean title to the shares. Then I look at the ownership arrangements, so whether there’s a shareholders’ agreement, whether it still reflects who owns what, and whether it would make every shareholder sell on the same terms if a buyer wanted the whole company.

After that come the commercial contracts. I look at your main customer and supplier terms, how easily they can be ended, and whether any of them can be terminated or renegotiated on a change of control, which is a clause sellers often don’t know is there. For the staff, I check whether key people have written contracts, whether those contracts contain restrictive covenants that are likely to be enforceable, and whether anyone is treated as self-employed who might not be.

With intellectual property, I look at who created what, whether it has been assigned to the company, and whether the trade marks the business relies on are registered to the right entity. With premises, I check whether the lease is in the company’s name or yours, when it ends and what it says about assignment, and I’ve written about what happens when the lease is in your name or your SIPP owns the building. I finish with the regulatory side (where the business needs a licence or authorisation to trade), data protection, and any disputes, claims or unusual liabilities that a buyer would want disclosed.

What you get

You get a written report which is graded area by area. Red means it’s something a buyer is likely to use against you, so it should be fixed before you go to market, amber means it will probably affect the price, the warranties or the timetable, and green means there’s nothing to do. For each item the report sets out what I’d recommend, roughly how long it should take, and a fixed fee for me to deal with it.

I then go through the report with you and you decide what to tackle first. You can have me do the follow-up work, or give the report to your own solicitor (it’s written so that another solicitor could pick it up), or decide that a particular issue isn’t worth fixing, which will sometimes be the right decision.

What it doesn’t cover

The review is a legal one, so it isn’t a valuation, a review of your accounts or tax advice. Buyers will look closely at the numbers too, and where that work is needed I can introduce you to corporate finance advisers, who quote for it directly. Your own accountant should be involved in anything with a tax angle, particularly any change to the share structure. My article on how much your business is worth covers where the legal and financial sides meet.

How long it takes

I’d expect it to take four to six weeks from instruction to report, and most of that depends on how quickly the documents arrive. I’ll send you a list at the start, much like the due diligence questionnaire a buyer would send, and you upload what you have. If there are documents you can’t find or don’t have, that’s useful to know as well, and it goes in the report.

How much it costs

The review is a fixed fee, from £3,500 plus VAT for a single company, depending on the size of the business. A group with several companies costs more and I’ll quote for it once I know the structure. Either way the fee is confirmed in writing before I start.

If you’d like a free first look before committing to that, the exit readiness scorecard is my own tool, hosted on my separate DealAdvisory site. It asks a series of questions and gives you a short report on where you stand. It can’t read your contracts, but it should give you an idea of whether it’s worth having someone do that.

Next steps

If you’d like a review, get in touch with a bit about the business and when you’re thinking of selling, and I’ll come back to you with a fixed fee.