The Process Of Buying A Business

The process can be more or less involved - it depends what you are buying and from whom.  

Where you are buying some or all of the assets of a business, most of the questions you will need to ask will revolve around finding out who owns the assets and what liabilities (if any) will come with them.

A big area of risk for a buyer of assets is the transfer of employees that are connected with those assets.  We can advise you on the risks of this taking place and also the ways to minimise your risks.  The key is to carry out detailed due diligence and find out as much as you can about the assets or company that you are buying.  This will hopefully highlight any problems and identify any potential ‘deal-breakers’ at an early stage.

Where you are buying a company (i.e. a share purchase), you are buying the company, warts and all.  You will therefore need to know what historic liabilities or risks the company has taken so that you can adequately protect yourself (for example by reducing the price or taking indemnities from the owners to get an adjustment of the price after completion of the deal where certain events take place (or do not take place).

At Blue Sky Law, we can assist you with:

• The initial non-disclosure agreement – to allow you and the buyer to exchange information in a controlled and relatively safe manner.
• The review of any offer letter  (or heads of agreement) – which may talk about your giving the buyer an exclusive period of time to review your business and have first say in any purchase.  This needs to be looked at carefully to ensure that it is in your best interests to only progress with one buyer, for instance.
• The collection and disclosure of information in a controlled and recorded manner to ensure that you are only giving any confirmations based on actual information provided to the buyer (where possible).
• Obtaining advice from your other advisors as to the best way to structure the deal for you.
• Putting in place any pre-sale changes to the structure of your business/company to make it more attractive to your prospective buyer.
• Discussing matters with your other shareholders or business partners to ensure that they get the necessary advice in a timely fashion.
• Dealing with the sale and purchase agreement to ensure that it reflects the discussions you have had with the buyer and minimises (to the extent you agree with the buyer) the risks to you and your on-going business (in a sale of assets) or your co-shareholders (in a sale of the company).
• We can also assist you where the buyer requests a personal guarantee from you or your co-shareholders/owners.
• We tailor our service and the level of involvement so as to fit your budget and requirement.   

You will complete the due diligence period knowing exactly what you are getting into. Potential deal breakers and other key issues should be raised immediately to maximise the time available to resolve such matters.

One of the key areas Blue Sky Law focuses on is “what happens to any existing employees?” There are regulations that apply when a business is transferred. The legislation is complex but, in brief, any changes to staff that you may wish to make after the purchase could result in you being summoned to an employment tribunal for unfair dismissal. It’s vital, therefore, that existing employees are informed and consulted during the due diligence process.

During the due diligence period we will draft a ‘sale and purchase agreement’ incorporating all the agreed terms of the sale. Subject to renegotiation as a result of the findings from due diligence, you and the seller will then exchange contracts with completion at a later date or agree to exchange and complete simultaneously.