Buying a Business
Purchase of Business
Buying a business (whether assets or shares in a company) can be an exciting and stressful time.
We have advised on business purchases and sales in many different industries, including (to name just a few):
- Health care
- for optometrists, dentists and doctors;
- Professional services
- for accountants, financial advisers and estate agents;
- Boutique purchases
- For example the purchase of a business for the contents of safe;
- River Thames events boat business;
- IT for IT support companies and e-commerce mail order businesses;
There are many similarities involved when buying businesses in different sectors. Equally, there can also be many differences. No one business purchase is guaranteed to run identical to the next.
Legal stages when buying a business
The main legal and commercial stages when buying a business include the following:
- The seller appoints an agent to find a buyer.
- An interested buyer decides makes an offer to buy the business, subject to contract. If accepted, then the parties appoint their specialist business purchase solicitor.
- We recommend buyers consider asking the seller to execute an exclusivity agreement or heads of agreement.
- Determine any condition precedents, for example obtaining landlord licence to assign the business lease, or funding requirements.
- Conduct due diligence. If significant liabilities are discovered then the buyer may negotiate a reduction to the purchase price, or ultimately walk away from the transaction. Typically due diligence can run from a few weeks to a number of months.
- Business purchase agreement and other purchase documentation are prepared and negotiated. Typically this process can also take a few weeks to a number of months.
- The deal is completed.
Business purchase due diligence
When buying a business, the law will provide very few protections as standard. The old legal saying ‘buyer beware’ is still very relevant in this area of the law.
Depending on whether it is a company purchase (buying shares from the shareholders) or a business purchase (buying the assets from the company), and the type of business, will determine the nature and extent of the due diligence process.
Whilst from the perspective of a seller of a business, there is nothing more irritating then having to complete a string of irrelevant due diligence questions, without understanding what questions are relevant to ask, a purchaser of a business may unwittingly inherit unwanted and unknown liabilities.
When retaining our services, we can provide comprehensive due diligence questionnaires, and in line with discussions with our clients ensure these are tailored for the appropriate business.
Business purchase, typical legal issues
Some of the typical legal issues to consider when buying a business include:
- How has the purchase price been set? Do we need to consider a price adjustment clause?
- What actually happens on completion of the purchase in addition to ownership transferring? Consider all the practical transfer steps from IT integration, any changes to workforce or staff working practices, changing bank mandates, notices to customers and suppliers.
- What sort of non-compete restrictive covenants are appropriate to require the seller to enter into?
- Are there any consents required from third parties such as a landlord of the business premises, a bank providing funding for the purchase, or assets used in the business but owned by third parties?
- Level of legal financial and accountancy due diligence to conduct.
- Consideration of appropriate warranties and indemnities to require seller to provide.
Solicitor for business purchase
Where we are appointed as the lawyer to act on the purchase of a business we have three key roles:
- First to investigate and report on the risks.
- Second, prepare and/or negotiate the relevant business purchase agreement.
- Third, attend to the completion of the business purchase.
Resources - Buying a Business
For specialist business law advice on the purchase of a business contact us by telephone on (020) 8275 0336 or by email at firstname.lastname@example.org.