The process of selling a business is a complex and potentially lengthy affair, requiring intensive planning and preparation to make sure all legal and financial boxes are ticked.
As a result, if you have found yourself facing the prospect of exiting your business, for whatever reason, then it’s vital you have all the necessary documents ready to help streamline the sale. Having the current paperwork prepared in advance will help to make this complicated and significant M&A process proceed as smoothly as possible.
Here is a roundup of the vital documents that you will need as you prepare to sell your business.
Financial Statements
The first stage of selling a business is, of course, finding prospective acquirers who would be happy to purchase it. To attract interested investors, you will need to have your financial statements in readiness so you can demonstrate your company’s profitability. You will also need these documents later for the due diligence phase of the M&A process, which allows a would-be acquirer to gain detailed insight into every aspect of your business.
The financial documents you need to have ready to hand should include:
- Up-to-date profit and loss statements
- Cash flow statements
- Balance sheets
Your prospective acquirers will be able to use these documents to judge the financial health of your company and whether it would make a valuable addition to their existing organisation.
Operational Documentation
Potential acquirers will need to understand the ins and outs of how your business operates currently and where it is going. As a result, you should prepare all critical documents related to its operations, from your company’s business plan to your standard operating procedures.
This paperwork will give interested parties a nuanced overview of the day-to-day running of your company, the processes it adheres to, and where it is headed in the future.
Contracts
As you navigate the process of selling your business, you should double-check and prepare all your contracts to make sure they are all legal and up to date. This includes:
- Employee agreements
- Supplier contracts
- Leases of property and/or equipment
Evidence of compliance
It’s important to demonstrate that your business is fully compliant with all the relevant regulations.
When you are preparing the company for sale, you should be able to produce the appropriate documentation to prove this, from environmental certification to health and safety reports and all essential permits and licenses.
Documents You Will Need During the Sale
As well as the reams of paperwork you will need to prepare prior to the sale, there are some vital documents you will need to obtain during the selling process as well.
A Non-Disclosure Agreement
Confidentiality is crucial during the M&A process, to ensure no sensitive information can be leaked or used by potential buyers for their own ends. That’s why you need to have a non-disclosure agreement in place (or an NDA, for short).
This document, which your prospective buyers must sign, provides a legal bulwark that will protect your business’s vital data from being disseminated or used for anything other than the sale.
Heads of Terms
Once you have found an interested buyer, a ‘heads of terms’ can be drawn up. This document is not legally binding, but it can be very useful for setting out the parameters for the sale and establishing initial terms, which can be negotiated later.
Some of the important points that are likely to be included in a heads of terms include the proposed price, what will be included in the sale, and a potential timeline for the M&A process.
Sale Agreement
Once the due diligence and negotiation stages have been completed, it will be time to craft the sale agreement for your business. This document is the most important piece of the puzzle, and is legally binding, so it’s vital that every aspect is correct.
Business sale agreements contain a great deal of crucial information, including:
- The names of the sellers and the buyers
- The agreed-upon price and details on the payment plan (i.e. will the money be paid in one lump sum or in instalments)
- The date for the transfer of ownership
- What assets are included in the sale (in terms of both shares and physical assets, like buildings and equipment)
- Warranties governing the conduct of both parties during the sale
- Details of the legal consequences that will occur should either party commit a breach of contract
It’s important to have robust legal advice during the creation of the agreement, to ensure that everything is set out fairly and accurately, giving you the best possible deal.
Why Use a Business Broker for your Sale
As you can see, selling a business requires a lot of preparation – and plenty of important paperwork.
If the M&A process seems daunting and you are asking yourself ‘How do I sell my business and get a good return on my investment?’ then you may want to hire a business broker.
Business brokers specialise in mergers and acquisitions, acting as an intermediary between buyers and sellers and assisting with every stage of the process. Having an experienced and reliable business broker to guide you through the sale can remove a lot of the effort and stress from your shoulders. They can handle everything from valuing your business and vetting your prospective buyers to creating high-quality marketing materials for your company and helping with negotiations.
Having a business broker to manage your sale will take a lot of the work from your shoulders and leave you with more time and energy to focus on running your business and preparing for your next chapter.
Harris Acquire – Selling a Business Made Simple
Whatever industry you are keen to invest in, it can be a significant advantage to use a business broker to help with your M&A strategy.
After all, business brokers have an abundance of experience when it comes to orchestrating mergers and acquisitions, from giving valuations to assisting with the negotiation process and due diligence.
As a result, they can guide you through the entire journey, providing invaluable assistance and advice as you move through the stages of buying a business. This level of expertise can prove particularly beneficial if you are new to the M&A process and find it all a little intimidating.
Of course, business brokers require a fee for their services, but if you have sufficient capital to invest in their assistance then it can remove a lot of stress and confusion from the process, as well as helping to speed things along.
Harris Acquire – here to help
Making the decision to sell your company – and getting all your paperwork in order in readiness – can be a prospect that is simultaneously daunting and exciting.
Here at Harris Acquire, we have a friendly and experienced team ready to take the hassle out of the M&A process and ensure your sale goes as smoothly as possible. From helping you prepare all the right documents to sending out marketing packs and providing advice on the negotiation process, we can take your sale all the way to completion.
To find out more, give us a call at 01926 757100 or send an email to Hello@harrisacquire.com.