“"More used to buying and selling commercial property and, a little rusty on the sale of businesses, Jane was recommended to me through my accountant as a good commercial lawyer. Totally on the ball, Jane is indeed highly competent and thorough. Very approachable with a style fostering mutual trust and respect, a top business lawyer, I'm very happy to recommend Jane's services. ”
David Kaye, Kaye Estates
Buying a business or company is a complex, often lengthy process. Your accountant or lawyer will be your new best friend and you’ll need to ensure your head rules your heart at all times.
1. If you find a company (the shares) or the business of a company (business and assets) to potentially buy you can get some initial information by looking at the records at Companies House and printing off some of the documents such as; accounts, debenture information, details of directors, shareholders and insolvency history.
2. Before a seller will enter into any negotiations with you he or she will require you to enter into a Confidentiality Agreement. You may want your business law solicitor to go through and amend this before you agree to sign it.
3. Once you have signed a Confidentiality Agreement you will enter into a Heads of Agreement (sometimes called a Memorandum of Understanding), which will set out the basic principle terms of the purchase. We would advise you to take the advice of your business law solicitor on the terms of this. Heads of Agreement are generally not binding on you but they do help to give direction to the purchase and speed up the time it takes to negotiate the terms of the Share Purchase Agreement or the Asset Purchase Agreement. The Heads of Agreement will always be subject to information that you are given as part of your ‘due diligence’ enquiries.
4. Once the Heads of Agreement are signed you will start your on-site due diligence work. By doing this you are trying to get as much information about the company and/or business as possible. You may ask your accountant and/or your solicitor to help with this depending on the size of the company or business that you are intending to buy.
5. At this point your solicitor will also ask the seller’s solicitor to produce information and documents as part of the legal due diligence and your solicitor will prepare the Share Purchase Agreement (SPA) or Asset Purchase Agreement (APA). It is accepted practice that the buyer’s solicitors prepare the SPA or the APA as they know what protections you need through the warranties and indemnities.
6. There will be a period of negotiation in respect of the terms of the SPA or APA. Sometimes this can be quite quick and at other times it can be protracted. There is no norm, each purchase is entirely different.
7. The seller’s solicitor will produce a Disclosure Letter to your solicitor. This is a letter which gives you details of any warranty, or part of a warranty (warranties are statements of fact about the company and/or the business) that are not true. If you accept a disclosure then you cannot later rely on the warranty as a way of suing the seller unless the seller has given you an indemnity. Often information given in a Disclosure Letter, if of a serious nature, leads to a reduction in the purchase price or you possibly ‘walking away’ from the purchase or there being a retention made by you against the purchase price.
1. Believe us - it nearly always takes longer to achieve a completion of the purchase than you think!
2. Information that may make you reconsider your position is most likely to come to light through your due diligence enquiries or through the Disclosure Letter. Think… Do you want to continue at all? Do you want to continue at a different price or on different terms? Do you need the protection of indemnities or a retention? Never be afraid to re-address the basic deal because of new information made available at a later date.
3. Make sure that you get on well and trust your solicitor or accountant as the purchase process can be long and complex, and you will be spending a lot of time in their company!