Buying and selling a business: A practical guide

Buying or selling a business is often one of the most significant transactions a company or owner will undertake. Whether pursuing growth through acquisition or planning an exit, success depends on early preparation, clear strategy and disciplined execution.

While economic uncertainty continues to shape market conditions, M&A activity remains an important driver of growth. In the Midlands, for example, recent data points to a more measured deals environment, with lower transaction volumes and increased scrutiny from buyers. However, appetite remains strong for high-quality businesses, particularly among private equity investors with capital to deploy.

Against this backdrop, achieving the right outcome requires more than simply finding a buyer or target. It demands a structured and well-managed process. Drawing on Mills & Reeve’s corporate and transactional experience, this guide highlights the key stages.

Starting the process – where to begin

The starting point for any transaction is clarity of objective. Buyers should define what they want to acquire and why – whether to access new markets, strengthen capabilities or achieve economies of scale. Sellers, meanwhile, need a clear exit strategy and a realistic understanding of how their business will be perceived.

Preparation is critical. A well-organised business, with its legal, financial and operational affairs in order, is far more likely to maintain value and progress smoothly through negotiations. Transactions rarely complete quickly (often taking 18 to 24 months from initial planning), so early groundwork is essential.

One of the most common pitfalls is allowing the deal process to distract from day-to-day operations. If performance dips at a critical stage, it can weaken negotiating power and lead to a reduced valuation. Maintaining strong operational performance throughout the process is therefore vital.

Engaging advisers early can also make a significant difference. Corporate transactions involve legal, financial and commercial complexities, and experienced advisers can help shape the structure of the deal, manage risk and keep the process on track. Involving legal advisers from the outset is particularly valuable, enabling potential issues, such as gaps in contracts, shareholder arrangements or compliance matters, to be identified and resolved before they become obstacles. Addressing these early can prevent delays, protect value and reduce the risk of last-minute renegotiation.

Confidentiality must also be addressed at an early stage, typically through non-disclosure agreements, to protect commercially sensitive information.

Take a good look at the target

For buyers, a central principle is simple: know your target. This is achieved through detailed due diligence: testing the business’s claims and examining its financial performance, contracts, intellectual property, compliance and operational risks.

In the current environment, this scrutiny has intensified. Buyers are examining every aspect of a business to ensure it aligns with their strategic objectives and to identify potential liabilities. Findings from this process can directly influence valuation and deal structure, including price adjustments and the use of warranties and indemnities.

For sellers, the same level of preparation applies in reverse. Preparing the business for scrutiny (often referred to as sell-side preparation) can significantly strengthen a negotiating position. This includes ensuring records are complete, contracts are documented and compliance issues are addressed in advance.

A key part of this process is the preparation of a data room, which contains all the information a buyer will need. Typically, this includes:

• Financial statements and statutory accounts
• Customer and supplier contracts
• Employment and HR documentation
• Property and asset information
• Tax and compliance records
• Details of debt, financing and insurance

Being “data-ready” not only speeds up the process but also builds confidence with potential buyers and reduces the risk of late-stage disruption.

Early involvement of legal advisers is also valuable at this stage, helping to identify and resolve issues in contracts, corporate structure or compliance ahead of the due diligence process. Taking proactive steps in this way can streamline negotiations and avoid value erosion.

Some sellers also commission vendor due diligence reports, covering financial, tax and increasingly legal matters. These independent reviews provide an objective view of the business, identify risks early and allow sellers to retain greater control over how the business is presented to the market.

How much is the business worth?

Valuation is both an art and a science. While owners and advisers may have a target multiple in mind, the reality is that a business is ultimately worth what a buyer is willing to pay.

In today’s market, that value is often more closely tested. Economic uncertainty and reduced visibility over future earnings are leading to more cautious pricing, particularly for larger or more complex transactions.

Value is shaped by a range of factors, including:

• Profitability and cash flow
• Growth prospects and market positioning
• Strength and stability of customer relationships
• Intellectual property or unique assets
• Risk profile, including legal and regulatory exposure

Buyers will also consider how the target fits strategically within their existing operations, for example, whether it offers synergies, cost savings or access to new markets.

For sellers, presenting the business in the best possible light while remaining transparent is essential. Attempting to conceal problems can undermine trust and jeopardise a deal. Addressing issues upfront, by contrast, helps preserve value and supports smoother negotiations.

Where gaps arise between buyer and seller expectations, these may be bridged through negotiation or creative structuring. If alignment cannot be achieved, buyers may ultimately walk away.

Structuring the deal and reaching completion

Flexibility is often key when structuring a transaction, particularly in owner-managed businesses with multiple shareholders. Agreement must be reached on how value is realised and distributed.

Pre-sale tax planning is a critical consideration at this stage. Taking advice well in advance can help ensure that the business and its shareholding structure are as tax efficient as possible, potentially maximising post-tax proceeds. This may involve reviewing how shares are held, assessing eligibility for reliefs or making structural changes ahead of a sale. Leaving these issues too late can limit available options and lead to unnecessary tax leakage.

The consideration payable to sellers may take several forms, including:

• Upfront cash payments
• Deferred consideration
• Loan notes
• Earn-outs linked to future performance

Buyers will also require a robust sale and purchase agreement (SPA), including warranties and indemnities to allocate risk appropriately.

Completion is the point at which ownership transfers from seller to buyer. In some cases, this coincides with signing the final agreement; in others, there may be a gap while certain conditions (such as regulatory approvals) are satisfied.

At completion, key steps typically include:

• Execution of final agreements
• Payment of consideration
• Transfer of shares or assets
• Delivery of supporting documentation and filings

However, completion is not the end of the process. Post-completion activities, such as integration, stakeholder communication and fulfilment of contractual obligations, are critical to ensuring a smooth transition and realising the full value of the deal.

Another feature increasingly seen in UK M&A transactions is the use of warranty and indemnity (W&I) insurance. This enables buyers to insure against losses arising from breaches of warranties in the sale agreement. For sellers, it can facilitate a cleaner exit by limiting ongoing liability, particularly where proceeds are distributed across multiple shareholders. For buyers, it offers additional protection and can enhance the competitiveness of a bid. Its use also reinforces the importance of robust due diligence and well-prepared documentation.

The value of a trusted team

Buying or selling a business is a complex undertaking, and having the right team in place can make a significant difference. This typically includes legal advisers, accountants and corporate finance specialists with experience in managing transactions.

A strong advisory team not only increases the likelihood of completing a deal but also ensures the process is handled efficiently, compliantly and in a way that maximises value. In many cases, expert advice can also deliver financial benefits by identifying risks early and avoiding costly mistakes.

Final thoughts

Despite ongoing economic challenges, the fundamentals of M&A remain strong. Businesses continue to view acquisitions and disposals as key tools for growth, succession planning and value realisation.

The consistent message is clear: preparation, transparency and expert guidance are essential. By investing time upfront, addressing issues early and maintaining focus throughout the process, buyers and sellers can successfully navigate even a more cautious market.

For those willing to plan carefully and engage with the process, there are still significant opportunities to unlock value, whether by acquiring the right business or achieving a successful exit.

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