What happens after you agree a business sale price? 

“I’ve agreed a selling price for my business. What happens next?”

It takes a lot of behind-the-scenes effort and expertise to value and bring a business to market. You’ve already been through this and the negotiation phase, having found a buyer with genuine interest and agreed on a price. Once you reach this stage, you might feel relieved the sale is almost over, however that’s when the real skilled work begins.

The weeks and months following an agreement to sell your business can be demanding and stressful. In this blog, we’ll explain the three key stages that take place following agreement of a business sale price, touching on due diligence, Heads of Terms, contracts, and solicitor involvement.

The process of buying and selling a business is complex. It can be difficult to know where to start. Our clients tell us that having a business broker by your side is a huge support and helps you achieve your desired outcome. Here’s how we can help.  

The post-agreement period is intense

When a buyer agrees to purchase a business, they will instruct their legal representatives and business analysts to investigate every last detail of the sale. And rightly so. Paid professionals have a duty of care to ensure buying the business is a good decision. They want to achieve the best deal structure and get value for money for their client. For the business owner this brings a level of intensity and scrutiny they may never have experienced, especially if the sale involves significant assets, business premises and staff.

Three key stages after a business sale price agreement

1. Draw up Heads of Terms

Once a verbal agreement has been reached, the first step is to draw up the Heads of Terms (HoT) agreement. This sets out the terms of agreement between all parties involved in the sale of the business. Usually drawn up by the vendor’s business broker, it is signed by buyer/s and vendor/s, it is then sent to both solicitors so they understand the early details of what has been agreed in the sale. The Heads of Terms may also be copied to both accountants and the landlord (if property is being included in the deal). It is an offer in principle but subject to the due diligence process.

While the finer details of the sale may evolve as due diligence is carried out and completed, the Heads of Terms will remain a valuable summary of commitment and should be used as a tool to guide necessary re-negotiations that due diligence may expose, as well as creation of the final contract agreement.

2. Memo of Sale

A Memo of Sale is a reference document which outlines the names and contact details of everyone involved in the sale and purchase of the business. Created at the same time as the HoT, it would usually include the buyer, vendor, accountants, solicitors, landlord, and business broker/s. The Memo of Sale is then circulated to all parties to facilitate good communication throughout the sale.

NB. If you’re reading this in the USA, you may know the Memo of Sale as a document linked to the sales particulars and marketing of a business.

At this point, whether to take your business off the market is your choice. Some vendors prefer to keep it on the open market until the final contract has been signed. Sometimes removing it from the open market is one of the terms stipulated by the buyer.

3. Contract of Sale

The third step is to draw up a contract of sale (often referred to as the Sale and Purchase Agreement or SPA for short), which triggers the start of the due diligence process. In a Goodwill & Assets Sale, this is usually done by the vendor’s solicitor. In a Share Sale, this is usually done by the buyer’s solicitor. The buyer and their team will require access to key financial, legal, operational, customer and employee information, which they will scrutinise to build a complete picture of business health and value.

Due diligence can sometimes feel like a game of ping-pong, batting requests and responses between you until all parties are happy and the original offer in principle has been confirmed. Having a broker by your side during this phase can be a huge support, releasing you to maintain business as usual whilst your broker assists with information requests. 

In our experience, solicitors and legal advisers will always be cautious in the advice they offer, whereas a broker is much more down-to-earth and realistic. After all, they are drawing on years of commercial experience buying and selling businesses. So, when that 10-year non-compete clause lands in your inbox, your broker is there to negotiate it down on your behalf, without exposing either side to undue risk.

Further guidance on what due diligence you should do when buying a business.

Timing is everything

Even after the final contract agreement has been signed, there is no time to sit back and relax. There are actions that need to be planned and aligned to complete at the same time, from the bank releasing funds to the handover of systems and business premises. It’s crucial to never lose sight of the last pieces of the jigsaw if you want the sale to complete within the agreed timescale.

External factors can also affect the timing of a sale, for example legislation. Changes to Capital Gains Tax bands in 2024 impacted several business sales we supported. Meticulous planning from our business brokers enabled sales to reach completion in advance of the deadline.  

How a Business Broker can help

A reliable Business Broker is the vendor and buyer’s voice of reason before, during and after a sale price has been agreed in principle. Find your local broker here. We can work with you before you put your business on the market and act on your behalf to guide and oversee business sale proceedings through to completion, getting the best possible deal for our client. Appointing a business broker is easy and can put you in a position of advantage. Get in touch to find out what your business is worth in today’s marketplace.