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The Main Steps in Selling a Business

A Step by Step Guide


A well run business sale will go through a number of distinct stages.  Few private company owners appreciate just how much work it takes to sell a company and the complexity of the sale process.  This post gives a brief outline of the main steps in the business sale process.  Follow the embedded links for more information on specific topics.

Step 1 – Appoint a suitable broker

As in any other profession there are business brokers with different areas of interest and expertise.  If you are  looking to sell a small retail shop or a fast food outlet you will be best served by one of the advertising based agencies.  If you are the owner of a multimillion pound manufacturing or service company a full service broker or corporate finance advisor will be a better option.

We have written about The Different Types of Business Broker and How to Pick a Business Broker in these two posts.

Step 2 – Preparation

Your broker or advisor should put a lot of work into getting you ready to face potential buyers.  A good broker will:

  • Help you address any areas of weakness that will put off potential buyers;
  • Suggest a realistic valuation range for your company;
  • Prepare a detailed sale memorandum;
  • Research potential buyers for your company;
  • Agree with you a list of the companies to be approached.

Step 3 – Marketing the Company
The approach taken to marketing your company will depend on its size and market sector.  Most companies are marketed in one or all of three main ways:

Contact Campaigns – your broker will approach other companies in or around your market to establish their interest in making an acquisition.  Each company is sent a “teaser” setting out some basic facts about your business without revealing its name.  For more on finding the companies most likely to buy your business read this post:  Where to Find a Buyer for Your Company.

Professional Networks – most business brokers and corporate finance advisors are part of professional networks that share “teaser” information on their clients.  Some of these networks have thousands of members in the UK and overseas.  Network members will be aware of corporate clients and private investment groups with an interest in your market.

Advertising – traditionally in specialist magazines such as Dalton’s Weekly and the quality press, but today almost exclusively on the internet.  All but the largest private businesses are advertised.  For smaller businesses advertising is the best channel to reach potential private buyers.  For more on advertising as way to sell your business check out this post: Is Advertising the Best Way to Sell a Business?

Companies and investors who are sufficiently interested will sign a confidentiality letter. They will then be sent the full sales details and copies of your recent accounts.

This post tackles one of the most contentious issues when marketing a company:  Should I set an Asking Price for My Company?

Step 4 – Meetings and Offers

Companies and investors who see your company as a good fit will want to meet with you and visit your premises.  Discussions at a first meeting will be wide-ranging without revealing commercially sensitive information on customers and prices.  The best way to approach a first meeting is discussed in this post:  Ground Rules for Meetings with Potential Buyers.

After the first meeting, and often some more disclosure of information, interested buyers will make a non-binding indicative offer for your business.  An indicative offer will be broader than just the price. It will state the type of transaction contemplated (shares or assets) and the structure and timing of payments.

If your brokers have done their job properly you will have several offers to compare.  In most cases each offer will have a different structure and approach to payment. You will need advice from your accountant, broker and legal advisor to understand the after tax value and the risks of each offer.

If interest is strong enough your broker may be able to improve the value and structure of the offers by negotiation or even organising a round of bidding.

Step 5 – Heads of Terms

Once the best offer is chosen your broker and legal advisor will set out the details of price, deal structure and payment in a Heads of Terms.  Often during negotiations matters are agreed verbally and this will be the first time they are written down.  It is not unusual for the two sides to have different understandings of verbal and even written discussions.  A well written Heads of Terms will smoke out any confusion before too much money is spent on due diligence and legal advice.

Step 6 – Due Diligence

Due diligence is a detailed investigation of the company by the buyer.  The depth and scope of due diligence often surprises the first time seller.  A typical due diligence will include at least:

  • A thorough audit by the buyer’s accountants of the financial and tax records of your company;
  • A thorough review by the buyers and their legal advisor of all the company’s contracts and agreements with customers, suppliers and employees;
  • Interviews with key staff;
  • A thorough commercial review of the company’s customer and supplier relationships and in particular any recent or expected developments.

In some industries due diligence will include environmental, heath and safety, employment and other regulatory issues.

Step 7 – Contract Negotiation

The last step in the sale process is negotiating the contract for the sale of your company or its assets.  This can be the most time-consuming and contentious stage of the whole sale process.  If the transaction is a sale of shares the contract will run to almost 100 pages.  Contracts for the sale of assets can be as short as 10 pages.

When a buyer acquires the shares in your company along with the shares comes the consequences of all the tax, legal, regulatory and employment actions undertaken by the company since its formation.  If under your ownership the company has committed an infraction in one of these areas, without the protection of the sale contract the new owners of the shares will be fully liable for any costs. Similarly if you have been less than truthful with the buyers, perhaps not fully disclosing problems with a customer, and the customer stops buying soon after the sale, the sellers will look to the contract for compensation.

The contract balances risks between the seller and the buyer and exposes a fault line in every sale process.  Sellers want their money free and clear, the buyer wants access to compensation for any undisclosed problems.  This fundamental tension has derailed many a sale process.

Step 8 – Closing

The end of the process.  The contract is signed, money due at closing is paid and the new owners take control of the business.


If you are interested in finding out more about these and other issues relating to the sale a private company one of our business sale experts would be delighted to talk to you in complete confidentiality. Click CONTACT ME to book an initial phone conversation or call us on 01604 432964.

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