- within Technology, Government, Public Sector and Privacy topic(s)
- with Senior Company Executives, HR and Finance and Tax Executives
- with readers working within the Business & Consumer Services, Consumer Industries and Healthcare industries
In this edition of It depends, associate Alfred Jackson discusses how to know if your business is ready for sale.
Video Transcript
Welcome back to It depends. My name is Alfred, I'm an associate in the commercial and private client team here at Cooper Grace Ward. And on this installment of It depends, we'll be talking about, 'Is my business ready for sale?'
How do I know if my business is ready for sale?
So, the first thing you probably need to think about is, are you doing a full sale or is it a partial sale? And you probably need to think about what does your structure look like and is it going to be attractive for a buyer? There's no single answer to that and ultimately it does depend. And it's worth sort of revising your structure and making sure that there's an attractive entry point for any potential buyer.
What do I need to consider first?
So, one of the first things you need to consider when deciding whether or not you're in the right structure, is making sure that all the assets which you're trying to sell are in the right place. So, for example, if you're thinking about doing a share sale, you want to make sure that all the business assets you're selling are in either one company or part of a corporate group, which is easy to sell. You want to make sure that you don't have any weird assets in weird locations. And if you do, it's probably worth thinking about restructuring. Just to make sure that they're in the right place. So, when you're speaking to a buyer and you're trying to negotiate the sale, that's not an additional issue you have to deal with down the track. Another thing to consider when preparing your business for sale is ensuring that any key client or supplier contracts are formalised and in writing. While it's not uncommon for existing businesses to operate on undocumented arrangements, having the certainty of that arrangement being in writing is likely to be something which is key for any potential buyer and can drastically affect the price.
What else do I need to consider?
Another thing to consider when preparing your business for sale, is considering whether or not there are any industry specific things which you need to deal with. For example, if there's a licensing regime which you need to comply with. If there's a licensing regime, this may involve certain notification requirements and can have certain sort of time frame implications on how your transaction might progress. So, it's something that you need to make sure you're aware of in advance, so you can budget sufficient time.
Do I need to undertake due diligence?
The final thing you should think about when preparing your business for sale, is whether or not you need to, or want to do reverse due diligence. So, what that is, is effectively undertaking due diligence on the business, almost assuming that you are the buyer. The reason why you do this, is to discover sort of any skeletons which might be in your closet upfront, so you can proactively deal with those, and so you have a response to any potential purchaser when you're negotiating the overall sale. Ultimately, as a seller, you don't want to be finding yourself in a situation where an issue gets raised at the eleventh hour and the buyer looks to use that issue to trim you on the price. And that's it for this version of It depends.
If you have any more questions, please feel free to reach out to me or anyone else in the team. Thanks for watching.
Cooper Grace Ward is a leading Australian law firm based in Brisbane.
This publication is for information only and is not legal advice. You should obtain advice that is specific to your circumstances and not rely on this publication as legal advice. If there are any issues you would like us to advise you on arising from this publication, please contact Cooper Grace Ward Lawyers.
