Business Sales

Determining the value of your business involves several factors, including your financial statements, market conditions, and the overall health of your industry.

Common valuation methods include:

• Asset-based valuation: This approach adds up the total value of your business's assets and subtracts liabilities.
• Earnings multiplier: This method involves multiplying your business’s earnings (EBITDA) by a certain figure based on industry standards.
• Market value: Comparing your business to similar businesses that have recently sold can provide an estimated value.

Engaging a professional business valuer or accountant can provide an accurate and unbiased valuation to help you set a realistic asking price. These individuals can work with your legal team to help facilitate the sale of your business. At NPR Law, we have an established network of financial professionals that we are happy to refer you to.

Due diligence is the process of thoroughly investigating all aspects of a business before finalising a sale. This involves the buyer reviewing:

• Financial records: Checking the accuracy of financial statements, tax returns, and profit and loss statements.
• Legal matters: Ensuring there are no ongoing legal issues or liabilities.
• Operations: Evaluating business operations, including employee contracts, supplier agreements, and customer lists.
• Assets: Verifying the ownership and condition of assets such as property, equipment or inventory.

Due diligence protects both parties by ensuring there are no post-sale surprises, and that the assets of the business are accurately recorded and included in the sale agreement. It can take some time to complete due diligence because it covers all aspects of your business. This is why you need the support of a reliable and experienced legal team.

The details of a business sale agreement will vary for each specific business. However, standard components include:

• Purchase price: The agreed-upon price and payment terms.
• Assets included: A detailed list of assets being transferred, such as equipment, inventory and intellectual property.
• Liabilities: Any debts or obligations the buyer will assume.
• Employee terms: The status of current employees and any arrangements regarding their employment.
• Warranties and representations: Assurances about the state of the business from both buyer and seller.
• Non-Compete clause: The buyer might seek to place restrictions on the seller, so that they cannot start a competing business within a certain timeframe or geographical area.

You need to take your time to cover everything and make sure the agreement reflects your business interests. Work with a professional team to ensure this is the case.

Intellectual property (IP) can be a significant component of a business’s value. During a sale, it's crucial to work with experienced specialists who will help you:

• Identify IP assets: This includes trademarks, patents, copyrights, trade secrets, and proprietary processes.
• Transfer ownership: Ensure the sale agreement clearly states the transfer of IP rights to the buyer.
• Verify protection: Confirm that all IP is legally protected and up-to-date.
• Assess value: Evaluate the worth of the IP to include in the overall business valuation.

Whether your staff will be included in the sale depends on the terms negotiated with the buyer. Generally, options include:

• Employee transfer: The buyer may agree to take on all or some of the current employees, maintaining their terms of employment.
• New contracts: The buyer may offer new contracts with potentially different terms.
• Redundancies: In some cases, the buyer may choose not to retain certain employees, leading to redundancy arrangements.

It's important to discuss employee terms early in the negotiation process to ensure a smooth transition and compliance with employment laws. Your lawyer will also talk to you about when and how to introduce the news of the sale to your team.

Selling a business is a complex process with many legal and financial considerations. A lawyer provides critical assistance by:

• Drafting and reviewing documents: Ensuring all agreements are comprehensive and protect your interests.
• Navigating regulations: Helping you comply with relevant laws and regulations.
• Negotiating terms: Assisting in negotiating favourable terms and resolving disputes.
• Due diligence: Overseeing the due diligence process to identify and mitigate risks.
• Closing the sale: Managing the closing process to ensure a smooth and legally sound transaction.

There are many points in the sale process that may trip you up, cause you to lose money, or result in the process taking months longer than expected. Reach out to NPR Law for a smoother, less stressful business sale process.

The time it takes to sell a business can vary widely based on several factors. On average, the process can take anywhere from six months to a year, but some sales may take longer. Here are key factors that influence the timeline:

• Preparation: Properly preparing your business for sale can take several months. This includes organising financial records, valuing the business, and getting documents in order.
• Market conditions: The current state of the market and the industry your business operates in can impact the time it takes to find a buyer. In a strong market, sales may happen more quickly, while in a weaker market, it might take longer.
• Business size and complexity: Larger and more complex businesses often take longer to sell due to the extensive due diligence required. Simpler, smaller businesses may sell more quickly.
• Marketing and finding buyers: The time it takes to attract potential buyers can vary. A well-targeted marketing strategy can help speed up this process, but finding the right buyer can still take time.
• Negotiations and due diligence: Once a buyer is found, negotiating the terms of the sale and completing the due diligence process can take several months. This stage involves a detailed examination of your business's financials, legal status, and operations.
• Finance: If your buyer needs to secure financing, this can add additional time to the process. The time it takes for a buyer to arrange their financing can vary significantly.
• Legal and regulatory requirements: Complying with all legal and regulatory requirements can add time to the sale process. This includes obtaining necessary approvals and ensuring all documentation is in order.

If conditions with your business change during the sale process, you may need to renegotiate certain elements of the agreement, which will add to the timeline.