Information on selling a business

Selling my business confidentially

The regional directors at Diverco understand how important the early stages are when you are looking at selling your business, confidentiality is absolutely key.

The selling process will take a number of months and if awareness of the sale of the business is known by employees, customers and suppliers, this can have a dramatic effect if the sale process is exposed,

Confidentiality at this stage is vital and this is when you need to be on top of your game – pushing the business forward and maximizing your profit to increase the desirability to a prospective buyer. We advise clients to concentrate on their business whilst we seek their buyer.

Selling a business can be time consuming

Selling a business is not a simple process. Even if you have a buyer in mind, we advise strongly that you will still need a broker..

There is the natural conflict that the buyer wants a low price but the seller wants to maximise the price. Yet buyer and seller need to remain on good terms as they will be working together certainly for the handover period. Trust between buyer and seller is critical, particularly when it is likely that some purchase price is retained for a period post sale. There is then the guidance and expertise to assist the seller through the sale process dealing with the lawyers and the paperwork. The majority of times a seller doesn’t use a broker the deal does not complete,

Dealing with selling your business can also take your focus off running your business, this is where a Brokerage firm is of the greatest value. We concentrate on selling your business for you, ironing out all the issues that might appear during the process, leaving you to continue running your business.

Preparing for the sale of your business

To prepare your business for sale you need to be driving the business hard to increase the profitability.

It is best to remove all non-business expenditure from the company, and also any assets that are not wholly used in the business.

However, if these assets are large value items then it might be best for tax reasons to leave these until the company is sold.

If you are seriously considering selling in the next year or two, question any serious new capital expenditure. If this increases profits in the short term it is likely to be beneficial to do so. However consider that the purchaser may have a surplus of this equipment.

Any new arrangements should be as flexible as possible and this would apply to new agents, distributors, leases etc.

Reasons for selling a business

Serious consideration needs to be given as to the real reason why you are thinking about selling the business. Is it because you wish to retire fully? Feel unable to expand further? Want to continue in the business but not have the responsibility for the financing of the company.

What is essential is for the seller(s) to a plan of what they intend to do after the company is sold.

Factors such as ill health and divorce can be pressing and immediate, which can put you in a weaker position when it comes to negotiations with the purchaser. To guard against this we advocate early discussions of your business to review your situation.

Who will buy your business?

Serious thought will also need to be given to the type of business or owners that you wish to sell to.

Price is important, but other issues are also important.

Some buyers will like you to work on for a short while to make sure the transfer of ownership is a smooth one, other buyers may prefer a clean cut purchase. You will have to decide which option is the best option for you and your business while recognising that a smooth changeover is important to you both.

Diverco can advise you on the different exit strategies available allowing you to identify what you wish to do.

The timing of a business sale

It is always good if a business has a varied and large customer base with no major dominant customers and it is easier to sell a growing business than one that is in decline.

Leaving your business with prospects for growth, is vital to maximize its value, from a buyers perspective, finding a buyer wanting to invest in a declining business is so much harder to find.

Look at new markets, look into the opportunity of new products and services, with or without investment, just because you are looking to exit, does not mean you don’t see a future for your business. Don’t sell your business when you think it will be at the top, there should always be room for growth for the purchaser.

The process of selling a business

Diverco quickly assimilate the information and will request some detailed information in order to prepare what is termed an IM.

An IM. is a brief document giving the background to your business. It outlines business processes and markets, including some details of assets for sale and recent accounts. This information is only sent to people who have shown an interest in the company after signing a confidentiality undertaking that legally restricts them from using any of the information contained within the document for purposes other than the acquisition of the company. If you prefer, this information would only be sent out after you have agreed that this enquirer should receive it. The IM. will give a lot of information but the real confidential information is still not disclosed.

A very short teaser document is also prepared and this is so general that the identity of your business cannot be determined even with the powers of Google. This teaser document is sent to a wide data base as well as sent to those sectors where we have analyzed that there might be interested parties. The teaser has legs and will be passed on by others.

When a prospective purchaser wishes to obtain more information than that shown in the IM. they normally ask for a visit to meet you. This meeting would then be arranged, normally taking place off-site to maintain confidentiality and in the presence of a Diverco regional director. Whilst the purchaser may indeed wish to see the business operations this can be arranged out of working hours to maintain confidentiality.

All communication from the interested party is to Diverco, thus allowing you to concentrate on managing your business.

Heads of Terms

At the next stage of the sale the purchaser will make an offer. This offer will most likely have already been negotiated by Diverco. However, there is often scope for additional tweaks to the offer depending on your needs. In most cases we would give you an indication as to whether this is considered a reasonable offer. When the offer is considered acceptable to you then a document is drawn up outlining the purchase contract for the purchase of the company, or its assets, which will include an indicative price and other major points of agreement in the deal. This is formalised into a document which is referred to as Heads of Terms.

The regional director will have, on your behalf, been in discussion with the purchaser to obtain a reasonable offer. Having received a draft of the Heads of Terms he will then negotiate further on those terms. The Heads of Terms need to be agreed and signed by both parties. Normally there is an exclusive period for the purchaser to complete the deal.

Completion Accounts

In most deals involving the purchase of shares, the total price will be dependent on completion accounts. These are normally prepared after completion but the basis of their preparation has been agreed within the Heads of Terms.

Due Diligence

During the period between Heads of Terms being signed and completion, the purchaser will carry out what is termed as Due Diligence.

This is a series of questions enquiring as to how the business operated. These normally cover three areas; legal matters, tax matters and financial matters and is in respect of the recent history of the company.

The regional director, along with a suitable M&A (mergers and acquisitions) specialist lawyer, will guide you through these documents. This can be very foreboding as the documents can be in excess of one hundred pages of questions. We advise you to answer these questions fully and if in doubt add it in Nevertheless, Due Diligence has to be completed ensuring the information requested is fully disclosed.

Disclosure Letter

Disclosures take the form of a disclosure letter, which the purchaser will then either accept or reject. The acceptance means that if an issue arises on that disclosure subsequent to the sale, any liability does not fall back on you. If (s)he rejects the disclosure, should a financial issue arise from this item in the future, then the liability technically falls back upon you.


These liabilities are included within the sale of the company under Warranties that are given by yourself. Again, these can appear to be onerous but a good specialist M&A lawyer with the regional director will negotiate with the purchaser and guide you through this process. There is always a de minimis amount and limit on the time period for a claim. Whilst lawyers may highlight the potential liability of a claim, it is important for you to consider the likelihood of any such claim. Has there been a similar claim in the last 5 years what is the likelihood of a claim arising in the next few years from an event before completion.


When both parties are agreed the lawyers – normally purchaser’s lawyers – prepare the papers for completion. The finalising of the papers can often drag on but at the end having signed all the paerwork you should have the money, the purchaser has the business and everybody can relax – or maybe that is when the real business starts.