I’ve acted for various clients recently who have sold their businesses and companies, some for many millions of pounds, and I have been astounded by the extremely high levels of risk, often personal risk, that some sellers seem quite content to take on board when they sell.
The terms that some sellers are currently prepared to accept are nothing short of suicidal in some cases.
Some sellers are indeed rushing to sell their businesses like lemmings and are seemingly quite prepared to do so on terms that, quite frankly, verge on the lunatic.
From the point of view of a solicitor giving advice to a client on selling a business, the challenge is to get the seller to appreciate the likely (and often potentially disastrous) consequences of selling on the terms first offered and then to negotiate sensible terms, even if this means that the deal is delayed and even in the face of the possibility that the deal could go abortive. The maxim ‘caveat vendor’ has few adherents. Let’s just flog it and the devil take the hindmost.
In my experience, and, particularly, in my recent experience, sellers are far too trusting of buyers who are promising a fat cheque for the business, especially when that fat cheque is not paid in cash on completion but is deferred and, even perhaps, conditional on future profits or other uncertain conditions, which conditions are usually not within the control of the seller at all.
It requires quite a lot of nerve to sell a business and a considerable amount of patience. I always tell clients that selling a business is a process rather than just a matter of pitching up and signing an agreement. And good legal advice on selling a business is difficult to find so, if, after having read this, you would like a ‘no obligation’ chat with me about any aspect of selling your business, just call me or ping me an email (contact details below) and I will be very pleased to spend an hour with you to talk through the issues. It will only cost you your time and it will probably save you a lot of anxiety and ultimately even a lot of money.
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Chris Sherliker – 020 7749 2700
Solid advice, and a nice post as well!
I’ve looked into selling my business out of interest for the future and a few things were brought to my attention…
1 – is the amount of money people are prepared to pay for a business, but I suppose when you get your head around it in regards to value, tax saving etc, its more digestable, but maybe people rush because they want to get their hands on the cash before they get found out!
2 – is the amount of people out there that offer ‘advice’, and once you meet a few financial advisers, brokers, accountants etc they all have their up front fee and angle! and they all tell you the others are talking shite…!
3 – people keep telling me to ask your accountant? how would they know anything about selling a business when their paid to do the books? Is it typical to involve your accountant in these matters?
Anyway the long and short of it is that I spoke to someone who’s actually done it in my own industry…so finally seemed to get nearer the truth, and he told me another way of doing things!
I’m not planning to sell my business at the moment, but its good to be prepared as you never know whats round the corner…i’m much more philsophical follow the birth of my son 18 weeks ago…:-)
Help!
Unfortunately, sellers of businesses are not always honest and upfront with their professional advisors. Often and increasingly they are desperate to sell to realise assets to pay personal debts. They need that fat cheque to stop house repossessions or court action and are willing to accept it at any cost.
Deferred payment based on future profitability is not generally recommended and can lead to arguments as to the accuracy of the disclosed financial figure. Payment on completion should be regarded by the seller as reasonable proceeds for the sale of his business. So that if he does not receive a penny more as a result of the seller financing he is not out of pocket.
In other words in my opinion seller financing should only be used to ensure that the business is sold for a top price, and if possible the loan should be secured on the business assets he is selling.