Mergers and acquisitions (M&A) can have a number of fantastic benefits if you’re looking to expand or branch out into new markets.
But if you are thinking of purchasing a new business then specialist advice is crucial – and as always advice getting as early as possible will help the process run more smoothly.
To give you an idea of the process of buying a business we have put together a helpful step-by-step guide:
Step 1 – Non-Disclosure Agreement and Exclusivity Period
The seller is unlikely to be willing to open their books and trading information without the protection of a Non-disclosure agreement to protect their confidentiality. In return, you will want to negotiate an exclusivity period during which the seller will not embark on negotiations with any other businesses.
This will provide you with the opportunity to undertake a detailed investigation of the business’s financial records and identify any issues, this is sometimes referred to as financial due diligence and it could have a significant influence on the final sale price or your decision to proceed.
Step 2 – Heads of Terms
At this stage, we would recommend that a non-legally binding Heads of Terms are agreed which outline the main terms of the purchase, an estimated timetable to completion and whether it is to be an ‘asset sale’ or if the business is a limited liability company, a ‘shares sale’.
Step 3 – Legal Due Diligence
It is at this stage that legal due diligence will start with an in-depth investigation into all aspects of the business, including its commercial contracts, ownership of property and assets, hire purchase and leasing contracts, employment contracts, TUPE requirements, pension obligations, insurances, banking relationships, data protection regulations and compliance obligations.
We work as part of your team to ensure that the seller has complied with all its obligations.
Step 4 – Agreements
Central to the buying process is the asset purchase agreement or share purchase agreement. This is a detailed contract in which we will ensure you have the protection you need in the form of a wide range of warranties and appropriate indemnities covering tax, future competition, employees and other potential liabilities.
If any property is being bought as part of the deal, separate agreements may need to be drafted to transfer the freehold or lease to you.
Stage 5 – Completion
The last stage is completion – The day the money is transferred and the business becomes yours.
Business acquisitions can be incredibly complex and it is important to seek specialist advice from someone who can walk you through the process step-by-step. To find out how we can help, get in touch with our team today.