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Please see below a selection of our frequently asked questions, if you need any further information please feel free to contact us.
Frequently Asked Questions
A Goodwill & Asset (G&A) sale will consist of the tangible assets (typically motor vehicles, stock, office equipment and machinery) and intangible assets (trading name, contracts and the ‘goodwill’ of the business). An offer from a Purchaser will be broken down into an amount for the Goodwill plus an amount for the Assets they wish to acquire. The remaining Assets and Liabilities of the Company will be the Vendor’s responsibility to resolve after Completion of the sale. Employees of the Company will transfer automatically to the Purchaser because of the TUPE Regulations.
1. In the case of Sole Trader & Partnership Entities a Goodwill & Assets sale is the only option available to the Vendors. In general, G&A sales are more advantageous to Purchasers, not least because they can choose which assets (and any in some cases liabilities) to take on.
2. A Share Transfer sale is when either the entire share capital or a percentage is transferred to the Purchaser, who indirectly becomes the owner of everything the Company owns, whether or not they want them all and whether or not they know about them all. The employees remain the employees of the Company at all times. In general, Share sales are more advantageous to Vendors.
This will depend on several factors including the Purchaser’s requirements and your own circumstances. In the initial stages of preparing the marketing material we will contact you asking what handover period you would be comfortable offering, and will ensure that all potential interests are aware of this at the preliminary stages. However, depending on your involvement within the Company, clients and staff, a Purchaser may require you to remain for a longer period of time to ensure the smooth continuity and operation of the Company. We would suggest for you to be as flexible as possible regarding the requirement for a handover, and that this, along with the sale price of the Company, is an area for certain negotiation.
Maintaining confidentiality about a forthcoming sale is of paramount importance, and it is imperative that the staff do not accidentally find out a Company is for sale. Some Vendors will inform their staff that they are potentially looking to sell at the outset, however the majority of Vendors will want to handle the sale in a more confidential manner. We have proven procedures in place ensuring that confidentiality will be maintained until the last possible moment. We would only suggest informing the staff of an impending sale after an offer has been agreed, Heads of Terms signed by both parties, Due Diligence completed, the Sales Purchase contract drafted and a Completion Date agreed. At this advanced stage the Buyer will have incurred various costs and devoted time to the acquisition, providing comfort of their commitment. We would suggest that the Buyer is present when informing staff, and that a Q and A session is held to reassure the staff of any concerns they may have. If dealt in the correct, positive manner, we have found that in general staff receive news positively, as it will signal a new challenge and offer new career opportunities through the growth of the Company.
In general the costs you can expect to pay are broken down as follows:
- Legal Fees
- Advisor’s Fees and other costs
1. Legal – The total cost of Legal fees will vary depending on whether the sale is on a Share Transfer or Goodwill & Assets Basis, and also if there is a requirement for ancillary documentation such as employment contracts or property leases. If the sale is on a Share Transfer basis then there will be a more in-depth Due Diligence period, and there will be requirements for you to provide stronger indemnities and warranties in the Sales Contract. Due to the nature of a Goodwill & Assets sale the Purchaser will require less protection post Completion and therefore the process can progress at a faster pace. We have solicitors who we can recommend to handle your sale who specialise in the sale of Mergers & Acquisitions, which helps to ensure that all the required documentation is drafted professionally, correctly and within the timeframes required, helping to ensure the final stages proceed smoothly and as quickly as possible. As an approximate guide to costs we would advise that for a Share Transfer legal fees will be between £10,000-£15,000 depending on the complexity of the deal, with legal fees on a Goodwill & Assets sale being between £5,000-£7,000.
2. Tax – Again the amount of Tax you will be required to pay post sale will depend on the sale basis of the acquisition. The Tax situation changed from the 5th April 2008 when the Chancellor ceased taper relief. We work very closely with specialist tax advisors who we will introduce to you during the sales process. We are very aware that we are not tax advisors, and would always suggest seeking professional advice before reviewing your tax position.
3. Advisors – This could typically include Accountancy expenses for producing Completion accounts if required, consultation costs from Tax advisors and Broker fees. If the sale is on a Goodwill & Assets basis then the ongoing liabilities of the Company not included in the sale will be the Vendors responsibility to resolve post Completion.
We do not charge a fee for a business valuation, this is a free service for those enquiring about selling their business. Following a meeting with our valuer you will receive a confidential report outlining our fees and terms and conditions should you proceed to sell your business through the Axis Partnership.
Typically once an offer has been agreed in principle there are 3 main stages which need to be completed prior to the completion of the sale.
Firstly we will draft the Heads of Terms agreement, which will be based on the formal offer submitted by the Purchaser. This document will detail all the basic aspects of the deal including purchase price, timescale of any deferred payments and the conditions of payment, any handover period, agreement of a period of exclusivity and highlight the relevant warranties and guarantees that will be required by both parties. This stage is usually completed in a matter of days, however if parties involve legal advisors at this preliminary stage then this can delay progress significantly.
Once this document has been signed by both parties then solicitors can be instructed and Due Diligence can commence. This allows the Purchaser to receive detailed information about the Company and its assets, ensuring that everything they have been informed thus far has been accurate. At this stage the Vendors will be required to provide detailed information about all aspects of the Company, and it is imperative that the required documentation is completed as a priority, otherwise delays can occur. Typically this stage should take a few weeks, providing the Vendors are prepared and reply to the requests in a timely fashion.
The final stage of this process is the drafting of the Sales Purchase Contract. This will be based on the Heads of Terms, and is the legally binding document detailing the sale of the Company or Assets. Providing the solicitors specialise in the mergers & acquisitions field this usually takes a few weeks of negotiating on certain points between both parties, however delays can occur if this is not the case. As an approximate guide we would expect the sale of a Limited Company to take 2-3 months from acceptance of an offer, with a Goodwill & Assets basis taking 6-8 weeks.
Our fees are transparent and are based on the size, type and complexity of your business. This will be outlined to you during your FREE business valuation.
To obtain an accurate valuation we, as a matter of course, look at the industry guidelines some of which are noted below.
- We base our valuations on recent successful transactions in each market sector
- Your business location
- Your reason for sale
- What type of sale are you seeking? For example Asset purchase, Full consideration, MBO or MBI
- Past & current financial performance – turnover, profits, balance sheet value, recurring income
- The future financial projections
- Your business history – quality, stability, USP
- External factors – (PESTL) Political, Economic, Social, Technical & Legal
- Who are your competitors & what is their market share
- What is the potential for your businesses growth – added value?
- Are there any contracts in existence – customer and supplier – what is their quality?
- Who are your customers? Quality, relationships, mix, lifetime
- Are there any Intellectual property rights or patents etc?
- What is the reliance on the business owner? How will you handover or are you prepared to remain involved?
- Other considerations for the business continuity
- What are the levels of potential personal income expected for a buyer
- What is the realistic expectation of the seller
We will work with you to ensure you are ready for sale and that your company’s books and records are up to date. You will need to provide (as appropriate) Statutory Accounts, Management Accounts, VAT and Tax returns, Cash-Flow Statements, the Fixed Asset Register etc. From the legal side of matters they will want to see just about anything that you have contractually or legally entered, so have prepared copies of loan/HP agreements, leases, contracts of employments, salary details, etc.
Along with the staff this is an area of confidentiality which is of paramount importance. As a general rule we would not suggest informing any clients of change of ownership until the sale of the Company has completed, and that during your handover period you introduce the new Owner to your main clients and answer any questions they may have. On rare occasions a client may need to approve a new Purchaser prior to a deal completing. On these occasions we would ensure that no party speaks with your client until the deal has been agreed and Heads of Terms signed, thus ensuring both parties have agreed the main aspects of the deal.