Kathleen Brooks
Q.I am thinking about selling my business in the near future. How do I go about finding a buyer?

A.The most common route is to get in touch with corporate finance advisers, says Jenny Robertson, senior associate at Stevens & Bolton, a law firm. “The first thing you need to do is to get a corporate finance expert. They are usually from a boutique finance company or an accountancy firm. Their job is to line up potential suitors for your business.” Robertson says that they usually have in-depth knowledge of a sector and will know who might be interested in buying your business. It is almost impossible to go through this process on your own, so your best bet is to find a corporate finance firm that you trust will work in your business’ best interests.

Q. Can I do this and keep costs down?

A.Advisers’ and lawyers’ fees tend to be the biggest costs. While the adviser is usually dealing with the commercial side and ensuring you get the best price possible for your business, the lawyers deal with the legal side of the transaction. Usually you will be charged a percentage of the sale price, which is negotiated at the start with the corporate expert. Lawyers will usually charge by the hour for their time. Robertson says that there are ways to keep the costs down. The easiest way to do this is to ensure that the process will run smoothly and as quickly as possible, since time really does cost a lot of money. This means getting your house in order before you even think about selling your business. The key thing that tend to hold up a process is due diligence. “The most important thing to the buyer is to make sure that the business has customers, so it is vital that commercial contracts are in place and up-to-date. If you have let commercial contracts expire then you need to replace them as soon as possible. Also, employee contracts need to be up-to-date and employee terms and conditions should be in place.” Robertson says that if there is a problem with contracts then it can delay the whole process: “If a due diligence issue crops up a week before completion then that can set the whole process back by at least a few weeks and that is when the costs start to add up.” So being as prepared as you possibly can be before the process starts is the first way to limit costs. The second is to pick your law firm carefully. Robertson says that a small business with turnover of between £5m-£10m doesn’t need to hire a Magic Circle law firm. A smaller firm or one that is based outside of the City can be just as good and they are a fraction of the cost. Some of the City’s top firms can charge upwards of £600 an hour for a partner and £300 an hour for a newly qualified lawyer so there are savings there. However, Robertson recommends that you check out what size law firm your prospective buyer is using before you make your own choice: “The corporate finance adviser should be able to give you a steer on whether the firm will run a deal on a hardline basis or if they tend to be more relaxed. If the buyer is using one of the Magic Circle then you don’t want to use a small high street law firm as it could put you at a disadvantage.”

Q. How should I manage the whole process?

A.Keeping on top of the process and knowing what should be happening and when is key, says Robertson. Selling your business is a great achievement, just don’t let the fees eat up all of your profits.