Buying or selling a business is a very complex process whether this is via an exclusive transaction or a bidding process. In either case, whether buying or selling, it is imperative that you have a legal representative throughout transaction.

Appointing a legal representative on the one hand will help you navigate the legal aspects of the transaction such as drafting share purchase agreements, undertaking due diligence and negotiating. On the other hand a legal representative can also manage the transaction process of the Merger or Acquisition to ensure a swift and meticulous transaction.     

Selling

If you are a selling your business one of the main benefits of appointing a representative is that you distance yourself from the selling process. This will allow you to focus on your daily operations so that your business retains its enterprise value. A representative will also help you attract as many buyers as possible and oversee the smooth running of the transaction process.

What is a Transaction Process?

A transaction process is a comprehensive framework that should be followed in order to sell your business quickly and for the best price. It will also ensure confidentiality and set out a strict deadline for potential buyers to make their offers. Moreover the transaction process gives the opportunity to the seller to provide all the relevant information of the asset which will also help reduce the time for due diligence.   

A good transaction process will begin by:-

1)Sending out a teaser

A teaser will outline the key attributes of your business or asset including relevant financial data and the future potential of the business. The teaser will also invite interested parties to submit a letter of interest and should also be accompanied by a confidentiality letter in order to prevent commercially sensitive information reaching your competitors.

2) This should be followed by a process letter.

A process letter will give a greater description of the asset for sale and the reasons for the sale. It will also set out the deadlines for the buyer(s) to submit a letter of intent and a binding offer. It will also provide the contact details of your representative in order to centralize communications. 

3) The Information Memorandum

This document can be best described as a pack of information which will give a complete breakdown of your business. This information pack will include audit reports, annual accounts, other assets, management and employees, clients and suppliers, products and services, shareholders etc. The objective here is to show the potential growth and value of your asset and reduce the time needed for due diligence. Your legal representative in conjunction with a certified accountant will help you disclose the right information.

4) Letter of Intention (Non-Binding)

A letter of intent will be submitted by a buyer before the given deadline. It will include the offer price, the method of payment, how quickly the buyer can conclude the purchase and if there are any conditions to the purchase. At this stage your representative will negotiate with the buyer(s) on your behalf in order to maximize your potential returns.

5) Due Diligence & Management Presentation

Following the submission of a letter of intention and up until a binding agreement is concluded it is the seller’s duty to disclose all the relevant information to the buyer(s). Your legal representative will be able to help you disclose the right information which will reduce the risk for guarantee’s or claims by the buyer after the sale. Disclosing all the information is very important as uncertainty can reduce the offer price. Your legal representative can arrange to transmit all the information to the potential buyers electronically or provide a data room at his office which will be available to the representatives of the buyer(s) to inspect. 

Traditionally a management presentation is also scheduled in the transaction process which will give the chance for the buyer to meet the management team.

6) Submission of a Binding Offer

The transaction process framework will specify a deadline date for a binding offer from the potential buyer(s). At this point the seller can either accept, reject or ask the buyer to significantly improve their offer. Your representative can manage the negotiation process and also make sure that the legal documentation is prepared in anticipation of closing a deal.

7) Closing & Fee’s

Once a deal has been concluded between the seller and the buyer a meeting will be arranged between the buyer and seller by your representative. At this stage the purchase price will be paid and the share certificates will be transferred to the buyer. Traditionally your legal representative will ask for a fee of 3-5% of the purchase price for his services however it is advised to incentivize your representatives’ fee by using variable fee clause to ensure that they strive for the best sale price.

 

By Zak Poutziouris

Corporate Lawyer

Poutziouris Law Firm | PLF

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