Alasdair Dunn: Get good advice on when and how to sell a company

Selling a business is a major decision for any owner – not to mention an opportunity to reap the rewards of hard work and long-term investment. So what things should you be aware of, and prepare for, ahead of the sale? There are five steps to consider that will make the process as smooth as possible.

The process of a sale from beginning to end can often take several weeks or months and is likely to be time consuming. It is important to have people and procedures in place to ensure that management of the business is unaffected.

Ensure that you appoint trusted and experienced professional advisers to represent you at an early stage – both of these steps will give a buyer confidence.

If your business is held through a company you should consider whether to sell the shares in the ­company (which will generally take all the assets and liabilities with it) or have the company sell only specific assets.

There can be advantages and ­disadvantages for both options so it is important that you take advice ­early. There will also be tax ­implications for you to consider – a good tax ­lawyer is likely to be a crucial adviser in the ­structuring and timing of your sale.

Most buyers will want to carry out an in-depth review of the business to understand its strengths and ­weaknesses and to confirm their valuation (a process called due ­diligence). This will involve reviewing key ­customer and supplier ­contracts, property leases/titles, employee information, accounts, permits and business policies and procedures.

Before you give any potential buyers access to these documents, ensure that you have reviewed them with your advisers to identify and deal with any potential issues that could otherwise give a buyer cause for ­concern – and subsequently reduce the price that they are willing to pay.

It is important that any potential buyer signs a confidentiality ­agreement (sometimes referred to as a non-disclosure agreement) to ensure that any information ­given during due diligence is suitably ­protected. This is particularly the case when your business involves the use of valuable trade secrets.

It is normally wise to keep your ­decision to sell up from employees until a sale is certain, as their attitude to the ­business may be affected if they are concerned about job security.

Once you have an interested ­buyer you should agree a Letter of Intent (often referred to as a Heads of Terms).

This document sets out the main commercial terms of the deal before the detailed legal agreements are negotiated and should avoid ­arguments at a point when significant costs may have been incurred by the parties in the sale.

It is worth ­having your legal adviser check over the buyer’s draft to make sure it reflects ­market norms.

Alasdair Dunn is an associate in Brodies’ corporate team.