Specialist London solicitors for private company transactions.
Our experience gained in having completed so many deals in the past will help you to complete yours on time and within budget.
Please do call as we are always happy to discuss the commercials and provide a reliable fee quote.
What do clients really want from lawyers?
We are a specialist law firm focused on private companies and their owners. Our sweet spot is managing private company business sales at proportionate cost.
We advise numerous business sellers every year and are adept at getting the sale completed as fast and as cost effectively as possible. Our experience covers many industries, business sectors types and ownership issues on sale. Transaction values vary but a typical transaction size for us is between £1 million and £30 million.
Preparing your business for sale
Prior to selling a business, it is increasingly common to consider the structure of the deal.
You might want to retain a niche part of the business or maybe a loss-making activity is reducing the overall value. Spin-offs are common especially where there is commercial property which may not form part of the deal.
We can advise on the best structure to obtain an optimal valuation and/or other pre-sale considerations. We plan carefully to avoid unexpected taxation charges, which often arise with asset transfers.
Prospective buyers will request confidential information about your business, e.g. your customer list, financial information and your product information. Clearly you do not want to share this information without legal protection in place.
We limit your exposure, protect your position and safeguard your business if the buyer walks away. Our confidentiality agreements fit your circumstances, and define appropriate timescales for selling your business.
Purchasers often expect exclusive rights, i.e. a lock-out period during the costly due-diligence process. However, a lock-out can strengthen the purchaser’s negotiating position. We’ll tell you what is reasonable.
Due diligence management
The buyer uses the due diligence process to flush out weaknesses, potential liabilities, and perhaps negotiate price reductions. We manage this process. The buyer will ask to inspect your business and view key records and documents.
We prepare you, organise your documents, and respond to enquiries raised by the buyer’s solicitors.
Essential terms for the business sale agreement and negotiation
The sale agreement legal documentation is the last piece of the jigsaw. This is when our clients most need our expertise to limit their potential liabilities and risks.
We review and/or draft the terms for selling your business, and
- Explain: what the agreement means;
- Flag: key risks;
- Negotiate: as appropriate, on your behalf; and
- Ring-fence your future exposure: warranties and indemnities form part of the terms of sale. Our disclosure letters minimise future problems.
Warranties and indemnities
Usually we will negotiate these down for you. To understand the commercials you need to understand the difference between a warranty and an indemnity.
A warranty is a statement about a particular aspect of the business. An indemnity is a promise to reimburse the buyer for all losses if a particular event or set of circumstances arise.
This means that a buyer claiming for breach of contract under a warranty has to show loss, mitigate that loss, and usually can only claim for direct loss which flows naturally from the breach, or is in the reasonable contemplation of the parties.
You will need to review the equity structure to ensure all shareholders can be reached and a minority shareholder cannot hold up the sale. Drag along provisions and powers of attorney signed in advance of sale can be very helpful and provide assurance to a buyer that the sale will proceed without any unnecessary delays.
Employees are usually important to the business’s success. We have the expertise to manage employment law issues and changes to employment contracts.
- Asset sale as a means of selling a business: If the transaction is an asset transfer, then we manage the seller’s obligations under TUPE to consult with the relevant employees. The buyer cannot change the employment contract’s terms and conditions for a period after the sale. Some buyers therefore require the seller to implement employment contract alterations before sale. These changes can create difficulties for the seller, particularly under TUPE.
- Share sale as a means of selling a business: If the transaction is a share sale there is no change of employer and all existing employment contract terms and conditions remain. Therefore, TUPE is not an issue for the seller. Often the buyer wants to negotiate new terms for key members of staff who the buyer wants to retain. Retention bonuses designed to help transition the business are common. It is in the seller’s interests to engage in these negotiations because future profits and hence additional consideration is often at stake.
Tax on business sale
Our expertise encompasses capital gains tax on the consideration for your business. Usually our top concern is to ensure your eligibility for Business Assets Disposal Relief (entrepreneurs’ relief) which offers:
- 10% capital gains tax for qualifying shareholders; rather than
- 20% the usual capital gains tax rate on a share sale.
Not every shareholder qualifies for Business Assets Disposal Relief (entrepreneurs’ relief). There is a HMRC clearance process for the tricky cases relating to your trade – we can advise.
Another area where our expertise saves you money is on the negotiation of tax covenants and warranties under the share purchase agreement. [link https://www.gannons.co.uk/insights/tax-deeds-and-tax-warranties/] We deal with this as part of our service in managing the transaction which avoids the need for you to engage separate tax specialists.
We’re specialist solicitors for business sales – get in contact to discuss selling your business and how our lawyers can help.
Catherine is well known for turning complex problems into solutions. No case is ever easy but she will find a way. In her spare time she runs Gannons a very successful law firm.