Preparing to sell your business: 5 tips from a seasoned lawyer

When you’re about to sell your business it’s vital to be well prepared in advance of putting it on the market. This not only avoids costly delays but could also maximize the value of your business…

Get your lease in order

If you lease premises it’s important to review your current leasehold arrangements and determine:

How long is left to run?

  • If your lease has expired and you’re holding over or if there is only a short period left to run, you should consider negotiating a new lease or an extension with your landlord.

What are the assignment conditions?

  • Your landlord could withhold consent to the assignment of lease if these conditions are not satisfied, so it’s important to be aware what they are and what the landlord can ask for.

Do you fully understand your lease?

  • It’s always worth understanding where you are at with your term, options, rent and other obligations so you can summarise these to a potential buyer. (A commercial lawyer can prepare a lease review for you to form part of your due diligence as well as identifying anything unusual or onerous).

Sort out your important contracts

  • If your business is reliant upon certain key suppliers, customers or employees you should make sure (where possible) that formal written agreements are in place before the sale:
    • convert any verbal agreements into written agreements as soon as possible; and
    • review any existing contracts with suppliers and customers to ensure they are still current, have plenty of time left to run and can be easily assigned to the buyer as this could enhance the value of your business to a prospective buyer.

Decide what you are selling

  • This is a crucial part of any sale of the business and can cause problems if not decided and documented properly at the start.
  • Take appropriate advice and decide whether you’re selling the business or the shares in the company;
  • If the business is being sold, you should prepare a detailed schedule of all the plant and equipment, furniture, etc. that is included in the sale as
  • well as a separate schedule of what is excluded. The included items should be valued so there is no dispute down the line.
  • You must let the buyer know which (if any) of the plant and equipment is subject to hire purchase agreement or equipment lease, etc.
  • If you are unsure a commercial lawyer can conduct a search for you at the Personal Properties Securities Register.
  • You should be one step ahead in contacting the relevant companies and obtaining discharge certificates or arranging for the transfer of the hire purchase agreements, etc.
  • *If you agree to sell something free from encumbrances which later turn out to belong to a third party you could be liable to the buyer for damages.
  • If you own your business premises you should consider whether to sell these also or lease them to the buyer. Leasing can be useful where vendor finance is involved.

Get on top of your financials

  • You will need your financials to provide to a business valuer to prepare a true and accurate valuation of your business.
  • You also need to make sure you have at least 3 years (preferably audited) profit and loss statements and balance sheets to provide to any potential buyer (subject to execution of a tight confidentiality agreement, of course).

Prepare a seller’s pack

All large companies conduct a sellers’ due diligence and prepare ‘sellers’ packs’ containing all information and documents relevant to the business to give to prospective buyers (often held within electronic data rooms). In any event, you must ensure that your business is tidy and complete and available for inspection when necessary.

This will give the buyer everything they need up front so they can hopefully move quicker with the purchase and potentially increase the sale price.

Preparing to sell your business with GMO business brokers

With so many things to think about, preparing to sell your business can seem a little daunting. As Perth’s leading business brokers we know very well how to keep stress levels as low as possible. We are there to guide you through the whole selling process from start to finish. Our experienced business brokers will assist you with all the legal, structural and financial issues coming your way. If you are in need of any knowledge that we do not have in-house, we will put you in contact with other professionals that can assist with the process, such as lawyers and accountants. We are there to maximize your results.

Contact us to get started with the preparations needed for selling a business.

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Whether you dream of buying a business, want to sell your Perth or WA business, or want to know the value of your company – GMO’s business brokers and valuers are here to assist you. We have won the City of Perth Award for Business Excellence and our Managing Director has been elected as a fellow of the Australian Institute of Business Brokers. Whether you are a buyer or a seller, GMO can introduce you to the right person.

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CONFIDENTIALITY DISCLOSURE AGREEMENT

  • The disclosers are willing to disclose such information to the recipient subject to their acceptance of the following conditions:
    1. The recipient shall treat all information received from the discloser as confidential and shall ensure that all such information remains confidential and shall not use any such information in any way other than for the specific purpose aforesaid. The recipient acknowledges that all conditions subsequent in this disclosure apply to the recipient and any associates of the recipient be they partners, co‐directors, trustees, holders of shares or officersin entity(s) the recipient has interest in.
    2. The obligations of paragraph 1 shall not extend to any such information which is in the public domain, or which hereafter becomes part of the public domain otherwise than as a result of any unauthorised activity or omission of the recipient, or which is already in the possession of the recipient and was not derived from the disclosers.
    3. The recipient shall return all such information received other than that which is submitted orally at the termination of such negotiations entered into as a result of this agreement.
    4. The obligations set forth in paragraph 1, 2 and 3 shall terminate 12 months from the date of this agreement or upon the disclosers and the recipients entering into an agreement whichever event occursfirst.
    5. The recipient shall obtain no rights of any kind to such information other than for the specific purpose stated in this agreement.
    6. The receiving party will not utilise any material made available to improve, construct or change another business, in such a way as to allow that business to compete with the business being discussed.
    7. The recipient understands that the information has been compiled by GMO from details provided by the Vendor. Prospective purchasers should be aware that it is not intended that any projections or this information be treated as a representation, warranty or promise by GMO or its representatives, as to the correctness of the information, or that all relevant information is contained in the information provided.
    8. The recipient acknowledges that they will not act on information provided without first seeking independent financial and legal advice.
    9. The recipient hereby agrees to declare any beneficial interest in any business that could currently be interpreted as being in competition with the subject business.
    10. The recipient agrees to return all documents supplied within 50 days of receipt (and any copies) should they decide not to proceed. The recipient further agrees to destroy any electronic information supplied by the Seller or GMO and to instruct their professional advisors to also destroy any information passed on by the Seller, the recipient or from GMO.
    11. The recipient acknowledges they are precluded from physically visiting the premises of the business or talking to any client, supplier or employee of the business without the permission of the discloser.
    The recipient/s hereby accepts the above conditions as binding on them in respect of the information referred to.
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