If you are looking to sell your company or a business, then we have a specialist team of lawyers with the necessary skills to advise you on and to assist you with:
- preparing for the proposed sale; and
- the legal aspects of that proposed sale.
This work is often referred to as “mergers and acquisitions” or “M&A” work.
What are the options for selling a company or business?
As most businesses are run as private limited companies, you would most typically be looking to sell your shares in your company to the proposed purchaser as part of a share sale. Your company could, as an alternative, also sell its business and assets subject to all or some of its liabilities transferring to the purchaser. This is referred to as an “asset sale” or a “business sale”.
Alternatively, you might run your business as a sole trader, in partnership with others, as a limited liability partnership or under another type of corporate vehicle. Similar legal sale processes and principles apply to the sale of your interest in those entities and we are likewise able to advise you on such a sale.
The most appropriate deal structure for a sale will depend on the circumstances of the transaction, and the parties’ choice can be influenced by a number of legal, commercial, financial and tax considerations. For example:
- owners of private limited companies often prefer to structure a sale as a share sale over an asset sale as the former can be more tax advantageous than the latter; and
if you are one of a group of shareholders and your co-shareholders are not wishing exit but you are, then in certain circumstances, it is possible for the company to buy your shares back from you. This is known as an off-market company buy back of shares. This is often an attractive mechanism for exit as the company would then fund the acquisition of your shares rather than your co-shareholders.
How can our lawyers help with selling a company?
In an M&A transaction, our business sale solicitors will:
- assist you in preparing for the transaction, including pre-transaction agreements to protect information and crystallise the heads of terms of the deal;
- assist with your responses to legal due diligence enquiries;
- advise you on the legal documents (see below), together with all other ancillary legal documents required for the proposed transaction;
- assist you in determining the likely transaction timescale;
- liaise with you and your other advisers (see below);
- assist you and your advisers in negotiating the deal terms and the legal documents, which negotiations may be conducted over the telephone, in person or through correspondence;
- advise you on any matters which should be disclosed to the purchaser to help limit your exposure to warranty claims after completion;
- take the transaction through to exchange and completion and conduct a completion or closing meeting to ensure that all necessary items and documents are delivered on completion to ensure that the buyer ends up as the new owner of the target business and that you receive your purchase price;
- prepare a transaction bible to evidence your acquisition and to record the transaction documents, deal with any post-closing filing requirements you may be required to make at Companies House;
- if the transaction involves a completion accounts mechanism, assist you on agreeing the completion accounts with the purchaser and the making of any adjusting payments as provided under the share purchase agreement.
If there is a multi-jurisdictional element to a proposed transaction, then we can also coordinate and project manage the instruction of advisers in the requisite jurisdictions via our membership of MSI Global Alliance.
If there are specific areas of legal expertise required in a transaction, such as advice on employment law or commercial property aspects, then we would also liaise our colleagues in those departments on your behalf.
Working with your other advisers
Advising on the legal aspects of a proposed M&A deal is normally only one part of the overall process. Financial, tax and accounting advice will in most cases also be required and so, depending upon the complexity of the proposed deal, you would normally also engage a tax adviser, an accountant and / or a company valuation specialist to advise you on your sale. You may also wish to engage a business sales agent or a corporate finance specialist to assist you in marketing your business for sale and to help you prepare your information memorandum, which will set out key information about your business that a potential purchaser may require.
In each case, we would work with and form part of your team of advisers on the proposed sale.
Preparing for a sale and vendor due diligence
A sale is best achieved if it has been properly planned and prepared for.
It can take weeks or even months to properly plan for a sale. Ensuring that your business has been properly dressed for a sale before you go to market could also increase the chances of you finding a buyer, it will reduce the transaction timescale, it may have a positive bearing on the price which a buyer is prepare to pay, it may help to mitigate your exposure under the sale agreement and it could make the difference between a successful sale and an abortive transaction.
We are often instructed by potential sellers to conduct vendor legal due diligence on their companies as part of the planning and preparation phase before a sale process. In conducting vendor legal due diligence, we review specific areas of your business from a legal perspective and identify those areas requiring remedial action before a sale process is embarked upon. Examples include: ensuring that your company’s filing history at Companies House is up to date and accurate, that your company’s statutory books and registers are available and are in order, that all share certificates and shareholder registers are correct and accounted for and that there is clear evidence of your title to the shares that you are selling. Other examples are that we can ensure that the Company’s commercial agreements are in order and that the Company is able to evidence its title to its intellectual property (such as the source code to a computer program, the domain name of a company website or a registered trade mark).
Preparation of legal documents
Once initial negotiations with a potential purchaser are initiated, those discussions will normally culminate with the preparation of a set of heads of terms or a term sheet to summarise the non-binding key terms for the transaction. Heads of terms essentially serve as the skeleton summary of the deal structure.
During the sale process you may be required to divulge important company information relating to your company and its business. It is advisable that you get the potential purchaser to agree to keep your negotiations and your business information confidential. This can be achieved through a confidentiality or non-disclosure agreement.
Your purchaser may require that you grant it a period of exclusivity during which you agree not to enter into or to progress negotiations with any other party for the sale of your company. This is recorded in an exclusivity agreement.
Most purchasers will carry out due diligence on a target company before entering into definitive transaction documents. Due diligence assists the purchaser in properly understanding the business or company that he is buying and so it is important that you present an accurate picture to the purchaser. We are able to assist you in responding to the legal due diligence enquiries raised by a purchaser and coordinate the delivery of responses to the purchaser and their advisers. We will regularly establish and maintain a virtual data room where information can be shared easily between seller and purchaser and their respective advisers. Clients find that this helps the process to go smoothly.
The results of due diligence form an integral part of the preparation of a share purchase agreement or a business acquisition agreement, as appropriate, depending on the transaction being contemplated. It is usual that the purchaser’s solicitor would draft the contract for the purchase and the agreement will record in detail the terms and conditions regulating the sale and purchase, including such matters as the price to be paid and the legal protections granted to the purchaser, referred to as warranties. Warranties are short statements of fact about the business or company being sold. Depending on the results of due diligence, the purchaser may also require the seller to give indemnities. As seller you would normally have the opportunity to disclose to the buyer any situations where the warranties in the purchase agreement are untrue. These exceptions are normally recorded in a disclosure letter, which we will assist you in preparing. If we have been involved in assisting you with due diligence replies, it helps with drafting the disclosure letter as we will have a much better understanding of the business.
Our experience & fees
We have a specialist team of business sale lawyers at Lester Aldridge working on M&A matters who have significant experience in acting for both buyers and sellers.
We would normally work in teams on transactions, with larger or more complicated transactional work being led by partners (having on average between 20 and 40 years’ experience each in such work). Smaller or less complicated transactions are in some cases led by our associates, but under partner supervision. Where appropriate, work is also delegated to assistant solicitors and trainee solicitors to ensure that costs are kept proportionate.
A purchase price is often not a very good indicator of the complexity of a transaction, and so our position is that we are open to acting in both smaller and larger transactions. In recent times we have advised on sales which vary greatly in deal size and complexity.
In all cases fee estimates are agreed with the client at the outset of the matter. The extent of our fee will depend on such factors as the complexity of the matter, the requisite level of experience required to advise on the transaction, the anticipated transaction timescale and the nature and complexity of the deal. In all cases we strive to ensure that our fees are proportionate and market led.
While our M&A services are not sector specific, we do have sector-specific experience. This includes experience in the following sectors: Health & social care (care and nursing home businesses), IT, software development, manufacturing & export and hotels & leisure.
We act for a range of large multi-national corporations, as well as SME and owner-managed entrepreneurial clients.