Selling any business can be a time consuming and stressful process. The day-to-day pressures of running a successful business means it can be difficult to find the time to stand back and consider what is best for you, your family, and the business. In this article, we outline some key considerations worth thinking about when planning to sell your business.
Think about who might be best to advise you on your business and personal situation. This may be your existing team of advisers, particularly if they have a long history of knowledge of you and your business. However, it’s worth considering if it’s in your best interests to appoint a firm with specific experience of the sector and corporate transaction knowledge or indeed whether you have outgrown the expertise of your existing team.
Key to the success of any transaction will be how your various stakeholders are managed. This is important once a sale comes to the natural conclusion but particularly sensitive in the event of a transaction being delayed or aborted.
You should think about how other shareholders or partners in the business are kept informed about a pending deal, as they will naturally have an interest in the way in which negotiations are progressing. However, a pending sale can be unsettling for staff and customers too, so you should be sensitive to who is aware, and how any information is distilled. Your customer-base is the lifeblood of your business and may put a potential purchaser off if they become unsettled.
Preparing your business
Your advisers will be able to address how you prepare the business for a transaction. For example, it could be the case the ownership structure is complicated and consideration should be given as to how to make the sale as attractive to a purchaser as possible.
Similarly, you might have creditor or debtor positions on your balance sheet that are better dealt with ahead of a transaction in the same way as you might want to consider business premises, and how they are dealt with on a deal.
The deal structure
You will need to decide what works for you and any co-owners or partners. Think about when the transaction would suit you and your partners best; this may be driven by personal circumstances or tax situations for example. In addition, consider if you have a preference on who you would like to sell to. You will have built up the business over time, made sacrifices and invested time and energy with a strong emotional attachment – it’s vital that you consider who is best suited to take it on to the next stage to ensure your reputation remains intact.
Whether the proceeds from the sale are distributed as loan notes or cash will most likely be at the buyer’s discretion. Therefore, depending on your financial situation following the sale, it’s important to ensure the buyer’s requirements align with yours.
Taxation will play a role in any company sale and your advisers will be best placed to ensure you avail of the appropriate Government tax reliefs such as Entrepreneur’s Relief, which means that any capital gains are taxable at 10% on the first £10m of capital gains realised for qualifying business interests.
While this isn’t an extensive list, I hope this provides useful food for thought for those of you considering selling your business. The key takeaway is that careful planning is essential. Without it, you may quickly find yourself in a complex situation, trying to strike a balance between the corporate implications and the impact on your personal finances of selling the business.
About the author
Glenn Branney is the Regional Head of Julius Bear’s UK Wealth Planning team.
What matters to you?
Life, business, investments, aspirations - what matters to you matters to us. This article is part of our ’Your Wealth’ series, in which we have a close look at what lies close to your heart and how wealth planning may help you achieve your objectives.