Are you exit ready?

Selling your business is a major life event and can be a challenging process if you’re not well prepared (and well advised!) Helping to ensure your business is ‘exit ready’ through a legal health check is a strategy well worth investing time in, whatever stage you’re at in your journey.

What is exit readiness?

Being exit ready is about ensuring your business is in the best possible shape so that you can realise the most value when you decide to press the button on the sale process. The objective is to ensure that there are no skeletons unearthed by a buyer doing their due diligence that might go to value or worse still, jeopardise a sale.

Being well prepared instils buyer confidence. This will help ensure you have a stronger bargaining position, which in turn will increase your chances of getting the best price on the best terms.

Advance preparation helps to limit the distractions from running the business during the sale process, which can all too often suffer if the process isn’t managed properly. Having a well-ordered house also mitigates against the risk of any claims being brought post-deal by the buyer (such as warranty claims under the sale and purchase agreement) – planning early can provide peace of mind later.

When is the right time to start getting your business 'exit ready'?

A proactive approach to planning is the best strategy and ideally is something you build into your business practices each day, so that you’re “ready to go”, whenever that might be. However, if that’s not practical, we would suggest starting to focus on your exit readiness preparations two to three years in advance of the desired sale.

What can you do to start?

Focussing on the legal aspects, below are some of the key areas you will want to look at more closely, with an example of some questions you might ask yourself.

• Corporate – can we evidence ownership of the shares that are being sold? Are the company’s statutory registers up to date and is the Companies House filing history correct?
• Customers and suppliers – are the appropriate agreements in place? When do they expire? Do they contain any change of control clauses?
• People – do we have compliant employment contracts and service agreements in place? Are we compliant with National Minimum Wage legislation or other areas of employment legislation? Do we have the appropriate employment policies in place?
• Compliance – have all the necessary consents and/or licences required to run the business been obtained? Are any third-party consents required for the sale? Are we compliant with data protection legislation?
• Property – do we have evidence of title? If the properties are leased, can they be assigned or are there restrictions that would mean any sale would require consent?
• Intellectual property – is the IP sufficiently protected? Can we prove ownership of the IP?
• Disputes – are there any potential disputes? How can they be managed; can they be settled?

Looking at these areas now will help identify and resolve any potential issues earlier.

How can we help you?

At LCF Law we are experts in helping businesses ensure they are in the best position possible when it’s time to exit.

Please contact Rebecca Ridley on 0113 484 8823 or ku.oc1719523873.fcl@1719523873yeldi1719523873rr1719523873 if you would like to discuss this further.

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