Preparing your business for sale

For many of our clients, taking the decision to exit is an opportunity to reap the rewards of years of hard work and sacrifice. Whether an exit is part of a long-term strategy or the result of an unexpected offer, getting it right is critical.

Price. Painting the best possible picture of your business at the outset is important. A prepped business and seller is likely to achieve better pricing terms during early-stage negotiations and to preserve that expected price until the deal is concluded. A buyer is less likely to seek to reduce the price to account for legal issues in the business.

Risk. A buyer will usually require a seller to provide contractual assurances as to many legal and operational aspects of the business, covering areas such as employment, litigation, pensions, contracts, computer systems, real estate and tax. Dealing with any issues before a buyer conducts due diligence investigations can reduce the extent of such assurances being required and/or reduce the likelihood of being sued after the deal for breach of them. All businesses have exposure to a range of legal risks – demonstrating an awareness of these and showing that there’s a strategy for dealing with them gives sellers a far stronger negotiating position.

Time. The time and effort required from owners and managers during an exit process is often hugely underestimated. For many clients this’ll be a novel process. Exits require momentum and, more often than not, significant time investment. This must be balanced with the continued running of the business and all of life’s other commitments. Starting preparations early can drastically reduce this pressure.

Common issues

Share history and ownership. All companies must keep registers and make filings at Companies House regarding their shareholdings. We frequently encounter companies that have no registers evidencing share ownership or have registers that are outdated or inconsistent. Have there been any transfers, buybacks, or issues of shares?

These must be made in accordance with company law requirements, which are often very prescriptive. A void buyback of shares from a shareholder, for example, is treated as if it never took place at all. Who owns the shares goes to the heart of value and can quickly stop a deal in its tracks. We often explain to surprised owners that they don’t legally own the shares they think they do. Addressing such issues before a potential buyer identifies them can make it far easier to find a solution.

Contracts. Missing contracts, verbal agreements and onerous clauses in contracts are common. Depending upon the importance of the contracts, this may be a concern for the buyer as it’s often the contracting arrangements that underpin a company’s business operation and performance. You should also consider any contracting terms which might be impacted by the sale – are there any changes of control provisions which mean the other party can terminate the contract as a result of the transaction? Putting in place or amending contracts now is far easier than in the throes of a deal process.

Employees. Are staff engaged on terms acceptable to a buyer? Are they compliant with employment law? We often find that many contracts for key/senior staff don’t contain restrictive covenants preventing them from poaching customers and staff. You may want to keep a sale process confidential, at least initially, and that’s much easier to do if any changes are made ahead of a sale.

Constitution. All companies will have articles of association which are essentially a company’s “rule book”, as agreed between the shareholders. These are often out of date and inconsistent with current law (demonstrating less than ideal governance to a buyer), but may also contain restrictions on transferring shares or other onerous provisions, which would directly impact upon a sale. Articles can usually be amended almost immediately by agreement between 75% of the shareholders. Forward-looking business owners may want to go further and consider bespoke provisions regarding an exit event.

Intellectual property. Whether it’s the website or the secret recipe for your widgets, IP is often sitting in the wrong place, such as with employees, business owners or even third-party contractors. Buyers need to know that the company it’s buying owns the IP that it relies upon to run its business, or has sufficient arrangements in place for its use. Assignments of IP and/or licences of IP may be required and should be sorted out well in advance, and crucially before any inadvertent owner of IP realises they have leverage.


There are a multitude of potential issues that can give a potential buyer cause for concern. The good news is that it’s nearly always easier to sort these out before a buyer starts reviewing the business in detail – the earlier issues are identified, the easier any rectification will be. The important point is to take the initiative, speak to your advisors and kick the tyres of the business now – it’s never too early to start.

For guidance on managing your business, read our latest owner managed business special edition of Private Affairs.

Our content explained

Every piece of content we create is correct on the date it’s published but please don’t rely on it as legal advice. If you’d like to speak to us about your own legal requirements, please contact one of our expert lawyers.

Mills & Reeve Sites navigation
A tabbed collection of Mills & Reeve sites.
My Mills & Reeve navigation
Subscribe to, or manage your My Mills & Reeve account.
My M&R


Register for My M&R to stay up-to-date with legal news and events, create brochures and bookmark pages.

Existing clients

Log in to your client extranet for free matter information, know-how and documents.


Mills & Reeve system for employees.