Selling Your Business

Wednesday June 1, 2011

Presently sales are difficult as there is uncertainty in the economy.

All business owners are busy ensuring business operations are efficient so they are profitable but not all owners ensure their businesses are attractive to prospective purchasers. Sometimes, and often through circumstances beyond the business owner's control, businesses are listed for sale in a short timeframe. Ideally business owners should try to maintain operations so the business is attractive to prospective purchasers at all times.

Risk is not attractive to purchasers, their lenders or professional advisers.

Business owners must attempt to de-risk the purchase process and in doing so they should then be successful with selling the business.

The Team

The business owner and key employees, business broker, lawyer and accountant must all play a part to get the deal over the line.

No one team player adds more value than the other(s).

Business owners should consult with key employees and professional advisers at the outset.

Pre-listing for sale

Matters to be addressed by the Team.

  • Will existing business relationships survive beyond the sale?
  • Does the business rely on a single supplier of materials/services for end sale, single market or single end customer? Ensure you control the supply chain, market or end customer with written contracts which can be transferred to the purchaser.
  • Are staff loyal? Will critical staff remain in the business and not see the sales process as a catalyst to leave and potentially become the competition?
  • Is the business culture attractive to purchasers and can it be preserved?
  • Do lease, licence or franchise terms have sufficient time to run until expiry, or can they be renewed to preserve location and/or business goodwill?
  • Have the books of account been completed annually so they are available for inspection as part of the purchasers due diligence?
  • Have plant and equipment been maintained and are they sufficient for the purpose intended?

Negotiating the Contract

The business owner must:

  • Understand what is being sold, and particularly what has been represented about the business to prospective purchasers via the broker.
  • Know what will be acceptable as a break-down of the purchase price between tangible assets, intangible assets and stock and the potential tax consequences.
  • Understand the vendor's general warranties in the agreement. "Warranties" are representations made by the vendor about the business. If specific representations are found to be false or misleading, this may give grounds for subsequent claims.
  • Understand obligations before and after settlement. 
  • Know the consequence of the restraint of trade given by the owners, directors and/or shareholders.

Post-signing Contract

The Team should:

  • Ensure professional advisers respond to requests for information if required to do so in terms of the agreement.
  • Once unconditional, consult with employees.
  • Once unconditional, complete a personal property securities register search of all financing charges registered against the business assets which may need to be discharged against assets being sold prior to settlement.
  • Complete paperwork to give effect to what has been agreed in the contract.


Purchasers want certainty and transparency is paramount. There should be no surprises for the business owner or purchaser during the prospective purchaser's initial enquiry or subsequent due diligence analysis.

Most enthusiastic purchasers will be turned off the deal if during negotiations or forward into the post-contract due diligence period they discover the business is not what has been represented.

Plan for the outcome, maintain operations so the business is always attractive and get good advice.

Dean Thompson is a commercial partner in Holland Beckett based in Tauranga. Holland Beckett has 50 employees. The commercial team advises public companies, co-operatives, large privately held companies and individuals on business transactions and is regularly involved in business structuring and finance. In 2010 Holland Beckett won the Retail and Service Excellence Award at the Tauranga Chamber of Commerce Business Awards and was a finalist in two other categories.

Dean can be contacted on 07 571 3853 or

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