What does a perfect deal structure look like?
Updated: Sep 23, 2020
Your business is ready for sale, now it’s time to think more carefully about what your perfect deal might look like. Getting the best price is important, but the final transaction won’t be all about the headline figure. We will look at a combination of value and terms that is just right for you.
Deciding what's for sale?
Are you selling your business or its assets? If your buyer acquires the business in its entirety, they are looking to take the assets as well as the liabilities. The buyer will also want to mitigate risk as far as possible by undertaking their due diligence process. From a tax liability point of view, many sellers will pay less tax on profits from the sale of the business, rather than from an asset sale. It’s important to get specialist advice at an early stage to make sure your best interests are served.
Dealing with staff
There may be implications for employees regardless of the deal structure. Under UK law (TUPE), any obligations the current business owner has towards their employees may automatically transfer to the new owner. If the staff are integral to the operation of your business, then chances are the buyer will want to maintain the status quo. The important thing to do is to consult with staff as you go and get them on side.
Any deal structure will include details of the proposed handover period. It’ll specify whether you sever ties immediately or stay on for a transition period. It’s your call. We have had sellers serve a minimum six-month handover period. This helps the business transition smoothly and ensures the new owner has settled in.
How the business is paid for
How a business is paid for is also up for discussion. Often a seller will stipulate cash on completion, but other approaches can be taken, including a settlement of shares in the new company, for instance. In the case of a plc, share options may be a sound investment but taking shares in a small business can be risky, so make sure you explore the potential pitfalls if a share offer is on the table
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