If you or someone you know are considering buying or selling a business, then you ought to consider getting some practical advice at an early stage.
There are many aspects of a business sale which need to be carefully considered. The following are by no means a comprehensive list of considerations but may be helpful to you as a starting point.
- At a basic level you may need to consider the appropriate structure of the proposed sale. For example, determining whether the business is to be sold to a separate incoming entity, or whether what is being proposed may be best achieved by a ‘share sale’ whereby the incoming purchasers simply acquire the shares in the existing company.
- You may also need to consider which assets and liabilities (if any) are to be transferred. If there are existing supply contracts or a lease etc in place then the rights under those contracts may need to be assigned to the purchaser. Timing and consent issues (for example landlord consent to a lease assignment) need to be factored into any proposed settlement date.
- Are there existing employees who are expected to stay with the business? If so – who is going to be responsible for accrued entitlements or is an adjustment to be made at settlement? Are key employees accepting employment contracts with the purchaser likely to be a condition of the sale going ahead?
- Is there a component for goodwill? If so, are there particular intellectual property items which need to be specified in the sale contract and/or items which need to be transferred to the purchaser. Examples include registered business names and trademarks.
- Before you get to the negotiation stage it may also be appropriate to enter into either or both of a Confidentiality Agreement or a Heads of Agreement. In any event, if you are the seller then retaining control of any trade secrets may be of high importance to you and require careful thought as to what level of access to sensitive information you propose to provide to prospective purchasers. After all, your prospective purchaser may also be your current competitor.
- Are there any regulatory issues which need to be dealt with? For example, licences or permits which may need to be obtained by, or assigned to, the purchaser. Again, timing can be an issue here and applications may need to be made well in advance of any proposed settlement date.
- Finance and handover. You may need to consider whether the sale will involve vendor finance and also negotiate the precise terms of any handover/training period for the purchaser. These details are not something which can reasonably be left to chance and if not adequately addressed before concluding the deal, can lead to significant problems (and by extension costs) down the track.
- Accounting, taxation and business advice. You will likely need to obtain good quality advice on these issues throughout the business sale and purchase process. For example, choosing a poor business structure for your situation or overlooking a Capital Gains Tax issue may have significant financial implications.
Finally, if you have read this far and think that you will need some practical advice about your situation, then now is probably the time to get in touch. Austral Legal can help with business sale matters and we offer an initial discounted 30-minute SmartMove appointment for $80 by phone or in person at our office to discuss your situation.