Things to consider when buying or selling a business

Transitioning a business to new ownership is hard work.

The seller has usually poured their heart and soul into their business for many years, and it won’t just be the sale price that is important to them. They might place importance on their customers or clients being well looked after into the future or want to make sure their staff are taken care of if the purchaser is taking them on has employees.

For a serious buyer with long-term plans for a successful transition, they won’t only be focused on the commercial parts of the transaction either. They will want to understand the new business, get to know transferring staff and put strategies in place for everyone who is involved to have as little disruption as possible throughout the transition period.

We have spent many years helping clients navigate the business sale/acquisition process and things never go perfectly to plan. If the parties have the right attitude however and stay focused on practical solutions to challenges that pop up with a commitment to the overall goal of entering the transaction in the first place, then speed bumps that pop-up in the transition process can be effectively managed.

While it is critically important to ensure that your legal documents are comprehensive and include details like the sale price, a list of everything that is included in the sale, details of which employees are transferring to the new owner, important deadlines and more, it’s just as important to think about the logistics of the transition.

For example, are there new employees joining the team? If so, have you planned for things like whether they will need a new workstation, work telephone number or email address?

If you are acquiring things like registered business names, telephone numbers, email addresses and domain names, have you consulted with an IT professional about what needs to happen to transfer these assets to you? If the business is being run from a leased premises, you can’t just assume that the lease automatically transfers to you. You need to negotiate an assignment of the lease or a new lease in your favour as part of the transaction.

Then comes considerations like who has keys to the premises currently and do you need new keys or access cards for incoming staff?

If the business is reliant on certain software or a CRM system, have you thought about whether you are going to retain that system and if so, spoken to the provider of the system about getting the license transferred into your name?

If you are the buyer and this is your first time going into business, have you spoken with someone like an accountant about what kind of accounting software you should use to run the business?

Have you thought about the kind of message you want to send the marketplace about the transition? If the business you are purchasing has a great reputation and is well regarded in the community it might be beneficial to resist the urge to loudly proclaim that the business is “under new management”.

If the business is a little tired and you think it would benefit from a shake up, then maybe you need to think about how you’re going to market the acquisition and reposition the business in the marketplace.

For most businesses, their most important asset is their people. Have you taken time to understand what everybody’s role is in the business and how this might change once the transition is complete?

There is much more to buying or selling a business than the purchase price.

The legal documents are critical, and the logistics of the transition are equally as important.

We have always found however that the best transitions start and finish with a spirit of cooperation between buyer and seller.

Daniel McKinnon

Since graduating with two degrees in Law and Commerce from the University of Wollongong, Daniel’s spent over ten years solving a wide range of legal problems for the people of Western Sydney.

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