Selling a business can be a daunting task for a layman when it comes to deciding that they want to sell the business. IE: How long will it take to sell, who can I trust in the process and what are the various steps required to do so. At DEAL CHASERS we can assist a potential seller in this step by offering a free initial call and a free desktop valuation of the business. We do not charge any upfront commissions and are paid only on performance of the sale. We have been trading as business brokers for some 20 years and have honed the sales process down to a tee. Before going to market, a few important aspects need to be discussed and clarified, most importantly is the validity of the current lease agreement, can it be assigned, what is the remainder of the lease, when are the rent reviews, what is your turnover, cost of sales, turnover been increasing or decreasing, staff stability, GP, Nett profits, availability of financial information and many more factors will decide where the price is at.
Once a price is derived, and hopefully agreed on by both seller and business broker, the marketing of the business commences. Firstly, ANY agent, broker or “auctioneer” tells you to go public, you can shave 30% off your sales value. No business should EVER be advertised publicly.
Another key part of negotiations is the structure of the deal. While price is important, it is only one part. Each deal will have its own considerations and should be structured in the most advantageous way for the buyer and seller from a legal, tax and stamp duty perspective. When a seller is selling due to retirement, the CGT – Capital Gains tax- can be reduced from 33% to a mere 19% upon certain conditions. Read them here There are also various types of tax relief that may be applicable, for example, retirement relief or transfer of business relieve. Once a deal has been agreed, then certain legal documents must be drawn up. The most important is the purchase agreement, which set out the terms of the deal. Other documents that can be required include non-competition agreements – where the seller commits to not set up a rival business within a set time – or earn-outs, where the seller stays with the business and receives a set amount if the business hits certain financial targets within an agreed period.
In cases where there are several bidders for the business, there may be more than one round of bids made before a preferred bidder is identified. When a preferred bidder has been found, then negotiations are exclusively with them and they can access more information about the business to evaluate their price for the business. This practice is typically called the due diligence period. Read about due diligence here
Closing of the sale must be done via a HOA (Heads of agreement) and both buyer and seller sign this document. The buyer then pays a 10% down payment of the value of the business, to the business broker to show goodwill (Refundable if no contracts are signed) The HOA is not a legally binding contract and is merely an indication of the terms and conditions of the sale. The actual sale agreement is dealt with by the solicitors acting for each party respectively.
Raal Nordin is a representative of DEAL CHASERS BUSINESS BROKERS IRELAND