The angel investors first instructed us ten years ago. Recently, we were delighted to complete the sale of their company for a substantial return. We enabled the angel investors and the company to:

  • Implement an effective growth strategy;
  • Prepare the business for sale following its rapid growth;
  • Negotiate a sale with a large corporation; and
  • Negotiate and obtain shareholder agreement for the exit.

Angel investors incorporate the restaurant

In 2007, an chef began trading from a pop-up food stall, outside a London underground tube station. The dishes were popular, and the chef sought investment for a restaurant in the outskirts of the City. Two angel investors looking to invest in the chef came to us in 2008. We prepared:

  • Incorporation documents: to register the shareholdings in a private limited company;
  • A shareholders agreement: which set out each party’s responsibilities to each other, and the reports the investors would receive;
  • The company’s articles: tailored to the company’s requirements;
  • Company directors: left to the chef. We advised the angel investors not to become directors of the company.

Growing the business after angel investment

We were retained by the restaurant, becoming the business’s legal advisors. We protected the business’s intellectual property. The chef appeared on TV and authored cookery books. Much of the business’ value was in the brand and the chef’s recipes. We registered the chef’s intellectual property, in his own name, and then granted the restaurant a licence to use the chef’s intellectual property. This proved attractive on sale.

By 2010, the business had grown to three restaurants. Senior employees were awarded enterprise management incentives. The incentives were linked to performance metrics such as turnover.

With a recognisable brand, the restaurant chain attracted interested investors.

Preparing the exit

Together, the chef and the angels retained 80% of the voting rights. Nevertheless, there were 32 additional shareholders, some on enterprise management incentives.

The chef and the angels wanted to sell the business. We amended the company’s articles to include a drag along right. So if the company received an offer, agreed by 75% of shareholders, then this majority could force the remaining shareholders to accept the offer.

Sale negotiations

A buyer prepared to offer just over £10m was found. The due diligence was short, as we held everything, from incorporation documents to enterprise management incentive agreements. The buyer offered the chef and the angels a 15% share in the company following sale. We prepared:

  1. Bespoke employment service agreements to reflect the terms of the appointments;
  2. A tax covenant, limited to protect the chef and the angels in the future;
  3. A share purchase agreement for all 35 shareholders;
  4. Exercise notices, so that the enterprise management shares were included in the sale; and
  5. All corporate and commercial procedure documents.

There was also work in assigning the leases to the buyer.

Intellectual property

The chef wished to retain the registered intellectual property. So we ensured that our licence remained in force following completion. However, we varied the territory and use of the licence, so that if the restaurant under the new owners failed, the chef retained the right to use his IP elsewhere, e.g. in another restaurant.

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