UK: What Does The Process Of Selling Or Buying A Business Actually Involve?

Once the owners of a business have overcome the obstacles that lie in their way to the exit door, what is actually involved in going through that door?

Businesses that have previously been on a "buy and build" strategy will be well used to the acquisition process, but many owners will only ever be involved in one sale process. Business owners in this situation often rely heavily on friends and contacts that have been through the process before.  In many cases, those friends and contacts can paint an unflattering picture! So what is actually involved? Is it as time consuming and stressful as many indicate?

Generally, the various stages in any acquisition or disposal can be broken down into six main phases:

  • Pre- due diligence
  • Due diligence
  • Documentation
  • Pre- completion
  • Completion
  • Post completion

In this part, we look at the first three phases and some of the key considerations.

Pre- due diligence

Headline price

Before letting a potential buyer inside your business, it is important to establish at the outset the price range they are prepared to pay, or at least the method by which the price will be calculated. From a combination of financial information that is publicly available and additional (non-sensitive) information supplied by the business owner, a potential purchaser is usually able to give an idea of likely price. There are likely to be a number of assumptions being made when calculating this price and it will be important for the business owner to understand the nature and extent of these assumptions.


In addition to the actual headline price, how (and when) that is payable is a key consideration for a business owner, and should be discussed at an early stage with a potential buyer. An owner will usually want to get as much consideration in cash as soon as possible. A buyer will usually look to defer as much of the price as possible (issues in relation to deferred consideration and "earn outs" will be covered in future publications). Given the number of issues that need to be considered if consideration is deferred or subject to an "earn out", it is vital that a business owner understands whether this is the buyer's intention.

Knowing your buyer

Every business owner understands that a buyer will want to know as much as possible about the business it is buying before the sale completes, but not every owner will realise the importance of knowing the buyer. If there is any deferred consideration, will the buyer be good for the cash? If there is an earn out, do you trust the buyer to act in good faith during that period and not manipulate the short-term profits to reduce the price payable? If the owners are continuing in the business for a period after completion, can they work with the buyer? Consider speaking to the owners of previous businesses that have been bought by the buyer.

Due Diligence

Later topics will cover this subject in more detail but, in essence, this is the process where the potential buyer takes a very close look at the business it is thinking of buying to make sure it is getting what it expects and that there are no nasty hidden surprises lying in wait that will reduce the value of the business after completion.

The process itself is likely to involve the business owners' advisers setting up a "data room" where the key information that the buyer has asked to see is provided. These "data rooms" are now frequently online virtual data rooms. This can be a very time consuming process and the more organised the business is, generally the easier this process will be. Usually, during this process the business owner does not want too many of its employees knowing about a potential sale. This can have an impact on the information gathering and often puts a greater burden on the owners. It is usually worth considering bringing some colleagues into the process to help ease that burden (it is only so often you can use the excuse "the auditors need the information"!).

Some key things to bear in mind for a business owner during this phase:

  • Always have robust confidentiality agreements in place with the buyer BUT remember - if there is any sensitive confidential information that could significantly disadvantage the business if the buyer does not buy the business, don't disclose it to the buyer until you are happy that a sale is very likely.
  • Don't try and hide any of your skeletons. Trust is very important to buyers. If they think they can't trust you, there is a real risk of the deal not proceeding or that the due diligence is much more detailed and prolonged that it might otherwise have been.
  • Have clear lines of communication and responsibility.
  • Know what you are passing across. If there are any skeletons, make sure you know you are passing across a skeleton!
  • Try and have the documentation/information a buyer is going to look for prepared in advance of the buyer's request. The more a picture can be painted that the business is well organised and run well, the easer the process becomes.


Assuming that due diligence has progressed well, the buyer will then move to producing the first drafts of the main deal documents. Depending on timescales (and the buyer's confidence that it won't uncover any nasty surprises), the documentation is often produced at an early stage in the due diligence process so that negotiation of the documents can take place whilst the due diligence is ongoing. In most cases it is going to be the buyer's lawyer who produces most of the deal documents.

Don't underestimate just how much documentation is going to be involved and how long it might take to agree. The main document is of course going to be the acquisition agreement but ancillary documents (particularly those that rely on third parties' consent, such as banks or other funders) can play a very important role, and failing to address issues arising in relation to these documents can have a dramatic impact on the timetable. If possible, you (and your advisers) want to avoid negotiating key documents at the last minute – preparation and planning is critical to avoid this and a detailed timetable and responsibility list should be prepared – and adhered to. When appointing advisers, it is worthwhile asking them for a list of documents that are likely to be required. This will give you an idea of what is likely to be involved and may also indicate to you how experienced your adviser is regarding disposals or acquisitions of businesses.

Negotiating the documentation is often the most stressful part of the process. It clearly has the potential to bring the sellers and the buyer into direct conflict. This may be less relevant where the sellers are leaving the business immediately following completion, but in many cases it is important that the two parties are able to establish/maintain a good working relationship. You (and your advisers) need to be aware of this and it is at this point that experienced advisers should be looking to deflect/minimise the effects of some that tension/conflict.

Establishing how some of the key/controversial areas are going to be dealt with at the outset in a detailed heads of terms document can also help to avoid wasting time later in the process – the last thing either party wants to do is waste time, effort and cost on due diligence only to find that when the detail of the documents are being dealt with, there is a fundamental gap between the parties that can't be bridged. Understandably, many sellers don't want to engage in difficult conversations at the outset for the fear of putting the buyer off. The consequences of not doing this however, need to be clearly understood. If approached in the correct way, it is possible to deal with some of these potential hurdles at the outset.

In short:

  • Ask your advisers for a documents list early in the process so you can understand what is going to have to be agreed.
  • Always consider entering into detailed heads of terms setting out the key aspects of the deal.
  • Make sure your advisers are able to deflect some of the tensions away from you in the negotiations.
  • Make sure you understand the main documents and what they do. Your advisers should be able to explain them clearly to you and highlight the key aspects. If you don't understand make sure you ask your adviser. Effective communication between client and adviser is critical at this stage.

Click here to access our M&A Glossary, where we have tried to set out a "jargon buster" to help you understand more about your acquisition or disposal.

© MacRoberts 2015


The material contained in this article is of the nature of general comment only and does not give advice on any particular matter. Recipients should not act on the basis of the information in this e-update without taking appropriate professional advice upon their own particular circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.