Buying a business is a complex procedure. Whether it’s your first time, or you’re an experienced buyer, it’s very easy to forget things and to feel overwhelmed.
While you should always feel comfortable asking questions, the following will give you a better understanding of the process.
STEP 1 ENQUIRY
Your details will be entered into our buyer’s database (we ask for a minimum of personal information). We will use the details you choose to keep you up-to-date with business opportunities and information that we have available. You can choose to be permanently removed from our database at any time.
We will never share, sell or rent your personal information to third parties for their promotional use, except if we merge with or are acquired by another business entity. We may disclose or report personal information in limited circumstances where we believe in good faith that disclosure is required under the law. For example, we may be required to disclose personal information to cooperate with regulators or law enforcement authorities, to comply with a legal process such as a court order, subpoena, search warrant, or law enforcement request.
Complete confidentiality undertaking
This is obtained from all purchasers before we reveal any information that could identify the business. The business owner generally does not want their customers, suppliers, staff or opposition to know the business is on the market.
This is to ensure that financial resources, business experience and commitment to complete the transaction are present.
Present information memorandum (IM)
You will be provided with the information memorandum.
Once you have studied the information memorandum we follow up to ascertain whether you have any interest in pursuing the business purchase further.
STEP 2 NEGOTIATING
Arrange the first purchaser - vendor meeting
We generally have this meeting away from the office so it does not disrupt the business. If a site visit is required this is usually arranged after hours.
Provide further business details
As a result of the initial meeting you may have a list of questions to be answered.
Making an offer
This will generally be in writing as a Sale and Purchase Agreement or a Heads of Agreement. The agreement sets out all the terms and conditions of the offer and will almost always be dependent on you completing due diligence to your satisfaction. Switch Business can assist in drafting this document.
Switch Business will lead the negotiations. You will be advised to seek the relevant legal and accounting advice from your other advisors.
Obtain sale and purchase agreement
Once both parties have signed the contract there are now various conditions that need to be satisfied.
Agreements to solicitors
Each original contract is sent to the respective solicitor.
STEP 3 DUE DILIGENCE
Assist in satisfying conditions
The contract is usually conditional on due diligence, finance and if a lease is involved upon obtaining the landlord’s consent for the assignment of the lease. Switch Business is involved in all steps of this process and will liaise with professional advisors to ensure that all conditions have been satisfied.
Due diligence is the process where the purchaser along with their accountants and solicitors will examine the business in more detail. This usually involves an audit of the company’s financial and non-financial position and performance. Until this stage most of the information provided has been accepted on its face value and now the purchaser would like it verified. This process normally takes between 10 to 15 working days depending on the complexity of the business and also on the ease in which information is made available. Switch Business works closely with all parties during this process ensuring that any confidential information is protected and that the day-to-day operation of the business is not disrupted.
STEP 4 CLOSING
The contract is usually declared unconditional in writing by the purchaser’s solicitor, and both parties must honour the agreed transaction.
Deposit into trust account
Once the contract is declared unconditional, Switch Business will ensure the deposit is paid into their audited trust account and be dispersed according to the relevant law.
During the period between when the contract is declared unconditional and possession takes place, both parties and their accountants and solicitors will attend to any legal requirements that need to be finalised. A stock take is usually done before settlement and the settlement sum adjusted to reflect the value of stock (stock is calculated at cost price with any adjustment made for old and obsolete stock).
The vendor will generally be required to assist the new owner in the running of the business for an agreed period of time (usually up to four weeks), payment for this period is included in the purchase price. Any assistance beyond this period is usually by prior mutual agreement at an agreed rate of compensation.
To a first time buyer the above process may seem overwhelming, however Switch Business has been involved in hundreds of successful sale transactions and are able to lead you through the process.
If you wish to have a confidential, obligation free chat or come in for a coffee, contact us today.