Corporate & Commercial

Fail to prepare, prepare to fail.
What Every Owner Should Do Before Selling Their Business

Most owners think they know what they're selling. Most are wrong — or at least, not precise enough for a buyer's lawyers.

Selling a business is rarely a clean, single event. It's the sum of dozens of smaller decisions, most of which need to be made months before a buyer ever appears.

The owners who get the best price, and the smoothest process, aren't the ones with the most compelling pitch. They're the ones who've already answered the difficult questions before anyone had to ask them.

Here's what that preparation actually looks like.

Know What You're Actually Selling

Before you speak to a single buyer, you need to nail down the perimeter of the deal.

Decide what's in and what's out. Not every asset, contract, or entity connected to the business is meant to go with it. Work out who actually owns what — in group structures, the trading business and the legal owner aren't always the same thing.

Then choose your structure. A share sale is usually cleaner: everything transfers with the shares, subject to what the sale agreement says otherwise. An asset sale gives you more control over exactly what leaves, but means transferring assets and contracts individually, which takes more time and more third-party consents.

Think ahead to what happens to you, or your holding company, after completion. If you're winding it up or extracting the proceeds, buyers will want comfort that you can still stand behind your warranties.

That might mean an escrow, a retention, a guarantee from elsewhere in your group, or warranty and indemnity insurance — and if insurance is the route, it's worth scoping availability and cost with a broker early, since underwriting takes time.

If you've got dormant companies sitting in the group, deal with them now. Buyers don't want to inherit shell entities they have to unwind, diligence, and pay for later.

Make Sure Your Numbers Can Carry the Weight

A buyer isn't buying your business. They're buying your numbers' version of your business. If those numbers don't hold up, neither does your price.

Audited accounts carry far more weight than management accounts, and buyers expect recent ones — if your last audited set is more than a few months old, expect to be asked for management accounts to bridge the gap.

If you're carving a business out of a larger group and it doesn't have standalone accounts, budget the time and cost to get pro forma accounts prepared or reviewed by an accountant; buyers rely on them far more readily when a third party has been involved.

Keep your accounting policies consistent year on year. Changes in method, even for good reasons, are one of the fastest ways to trigger buyer suspicion.

And if anything unusual has affected the numbers — a one-off cost, an unusual write-off — get ahead of it with an explanation rather than waiting to be asked.

If you're planning a locked-box structure, where the price is fixed as at a set date rather than adjusted at completion, your locked-box accounts need to be recent (buyers typically expect no more than six months old) and ideally audited.

Locked boxes tend to work less well where a significant pre-sale reorganisation is involved — if that applies to you, a completion accounts structure may be the more realistic route.

Check for the Landmines Buried in Old Agreements

Some of the biggest deal-killers aren't in the accounts. They're sitting in shareholder or joint venture agreements nobody's read in years.

Check for share or asset options that a sale might trigger. Review any joint venture agreements carefully — JV partners can often force a wind-up, buy out the JV shares, or require the target to buy them out, any of which can change what the buyer thought they were getting.

Identify minority shareholders early, including employee shareholders, and work out whether you'll need their consent or whether a drag-along right lets you force the sale through.

Map out existing financing and security. Loans that become repayable on a sale, or charges over shares and assets, need to be dealt with or released by completion.

And where confidentiality allows, have quiet conversations with key counterparties before the process starts. A pre-emption right or consent requirement discovered during due diligence, rather than before it, costs you leverage you didn't need to give up.

Understand Your Own Tax Position

Ask yourself one question before you go anywhere near a buyer: does your business have its own tax history, or has it always been managed as part of a bigger group's arrangements? The answer shapes almost everything that follows.

If your business files its own tax returns, a buyer can diligence that history directly, and a clean record is a genuine bargaining chip that can reduce how much tax covenant protection you need to give.

If tax has been managed at group level, through shared losses or consolidated filings, the buyer can't see a standalone picture, and you should expect to agree a tax covenant allocating responsibility for pre-sale tax returns and liabilities.

Be honest with yourself about risk. Live disputes with tax authorities, aggressive positions taken in the past, anything that could crystallise as additional tax later — you need a defensible view on the exposure, not just a hope it won't come up.

And if you're sitting on valuable tax attributes like losses or allowances that will benefit the buyer, be ready to justify the value you're asking them to pay for it.

Get Your People Sorted Before the Buyer Asks

If your business employs everyone who works in it directly, employee transfer is straightforward — they move with the shares, or transfer automatically under TUPE on a business sale. Almost nobody's business is that simple.

Check for shared staff. Many owners run finance, HR, or IT through a central team, with only part of their time spent on the business being sold.

That needs resolving before completion, either through a proper transfer or an agreed transitional services arrangement.

Where TUPE applies, there's often a duty to inform and consult affected employees or their representatives before the deal completes — and in some jurisdictions that duty can arise before signing, so it needs building into your timetable early.

Review any group-level benefits, share schemes, or bonus arrangements — these typically don't survive the sale in their current form, and buyers will want to know what's being lost and what needs replacing.

Think about whether your key people's restrictive covenants are actually enforceable post-sale, because buyers will test this.

And don't forget immigration status: if any transferring employees are sponsored, the buyer will need a plan, and potentially a sponsorship licence of their own.

Face Up to Pensions and Extraordinary Risk

Two words make some buyers walk away before due diligence even starts: defined benefit.

If your business has any current or historic connection to a defined benefit pension scheme, be ready to explain its funding status, your relationship with the trustees, and whether any risk has already been transferred out through a buy-in or buy-out.

Since April 2022, UK employers sponsoring DB schemes, and their trustees, have had to notify the Pensions Regulator of certain sale-related events, including disposing of a material proportion of the business or granting security over a material proportion of its assets.

Get advice early on whether your transaction is notifiable — the regime carries real penalties for getting it wrong.

Separate the ordinary risks from the extraordinary ones. Customer churn, competition, and changing regulation are the buyer's problem to price in.

Live or imminent litigation, environmental exposure, or a recent regulatory breach are yours to explain, and possibly to indemnify.

For litigation, decide upfront whether you want to retain conduct of ongoing claims or hand them to the buyer.

For environmental risk, particularly if you're in manufacturing or have handled potentially polluting materials, get a diligence report done before you go to market — contamination discovered years later can attach to whoever owns the business at the time.

Line Up Your Consents Before You Need Them

You can have the perfect price and still lose the deal at the finish line, because nobody checked who else needs to say yes.

Map every consent you'll need: regulatory approvals, landlord consent to assign a lease, change-of-control clauses buried in supplier contracts.

Landlord consents in particular can be painfully slow, so start those conversations early, even before a buyer is confirmed, where confidentiality allows.

Waiting until signing to discover you need a consent is how completion dates slip by months.

Plan for Life After Completion

Most sales aren't a clean break — the business will likely need support from you for a transitional period, whether that's IT, finance, legal, or procurement.

Have a clear inventory of what it currently relies on so you can agree realistic transitional services terms rather than scrambling for them mid-negotiation.

If you're keeping any ongoing commercial relationship with the business, such as a supply arrangement or a brand licence, treat it as a real negotiation in its own right.

And if the business will stop using your group's brand, decide when and how the rebrand happens, and whether a transitional licence makes sense.

The Bottom Line

None of this is about hiding problems from a buyer. It's about not being the one explaining them for the first time in the middle of a negotiation.

If a buyer identifies an issue before you do, you're immediately on the back foot — not just on that issue, but on their confidence in everything else you tell them.

The businesses that sell fastest, and for the best price, are the ones where the owner has already done this thinking.

Preparation doesn't just protect your price. It protects your leverage, your timetable, and your ability to walk away from a deal that isn't right rather than being forced into one that is.

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