Getting your Business Ready for Sale

Rebecca Hegarty, Peter Stewart

The reasons that a business owner might look towards selling their business are many and varied - with the choice potentially being triggered by an expression of interest, or simply a decision based on the ripeness of the market.  Sometimes, the sale is forced on a business owner due to circumstances outside their control or having come out of a dispute between business partners.  

To get the most value for your business, prior to having lawyers draw up any contracts, it is important to conduct due diligence on your business in order to ensure that it is ready for sale.

Below are Coleman Greig's top 5 tips for getting your business 'sale ready'.

1. Review 

Reviewing what you currently have in place, and in turn what you actually have that you can sell, is critical.  This will often form part of a purchaser's due diligence.  

It is important to consider:

2. PPSA

Creditors often make registrations on the Personal Property Security Register (PPSR) without necessarily advising you beforehand, or having any requirement to serve you with a financing statement (e.g. where you have waived compliance with this requirement).  This results in registrations made against your business which may no longer be current, or which may simply be incorrect.

As such, it is important to conduct a PPS search on your company business and review which registrations are either incorrect or no longer current.
Consider issuing amendment demands for the effective discharge of those that should either not be, or no longer be on the PPSR.

Where your financier has a security interest over all your business' assets, you should consider what they would require in order to remove that security interest.

3. The Premises

Does your business occupy the premises from which it operates through ownership, a lease or a licence?  If your premises are leased or licensed, consent from the landlord will generally be required for any sale.  This takes time, and will need to be factored into sale timeframes.  

If you are not transferring the right to occupy the premises, think about whether you have any 'make good' obligations that will need to be taken care of prior to you vacating the premises.  If so, what will these obligations cost you?

4. Assets

Consider which assets are used in the conduct of the business, and similarly identify those that are not.  Consider their condition and value.  Ask yourself whether these will be provided with clear title - and if you do intend to provide them with a clear title, consider what costs you will face in doing so.
Give thought to how you will treat any part-completed work (i.e. work in progress).  Will you finish this, or will the purchaser take this work over?  Similarly, how will you deal with any deposits that you have already received for part-completed work?

5. Employees

Consider whether the transaction will involve a transfer of employees.  If it will, you will need to be able to provide the purchaser with a table of their names, positions and accrued employee entitlements.
Their entitlements to the completion of any sale will also be your responsibility.  There may be an adjustment for any accrued entitlements as at completion of the sale in favour of the purchaser.

Ensure that any non-salary benefits given to employees are documented.  Purchasers are entitled to know what each transferring employee expects to receive as part of their remuneration package.

You should identify any 'key' employees whose employment by the purchaser may be a 'condition precedent' to the transaction being completed.  Ask yourself whether you are going to be vulnerable to a 'key' employee deciding whether or not they will transfer employment to the purchaser - if you are, the situation will need to be handled delicately.

Key Advisors in your Corner

Having key advisors in your corner is crucial.  Consult your lawyer and accountant on whether the sale of your business as a 'going concern' (for GST purposes) is the most effective way to proceed, or whether what you may really want is something else (e.g. the sale of your shares in the company).  

Remember to consider any tax implications that the type of sale you are considering might have on both yourself and the purchaser, and have a good understanding of how best to arrive at a purchase price that reflects the value of what you are selling.  

Finally, before entering into any negotiations with a prospective purchaser who wishes to examine your confidential material, always remember to have them sign a non-disclosure/confidentiality agreement.
This is, after all, called 'confidential' information for a reason, and should not be used by a purchaser other than for considering whether to enter into the sale transaction.

If you have a query relating to any of the information in this piece, or you would like to speak with a lawyer in Coleman Greig's Commercial Advice team with regard to the sale of your business, please don't hesitate to get in touch today: