Business Parnership Structuring Your Sale Outlining some of the most common sale structures Structuring Your Sale Outlining some of the most common sale structures

There are several ways to sell a business.

Depending on the type of business a sale it can be structured in different ways – Our goal is to find one that suits you and optimises your sale proceeds.

As business sale experts Business Partnership understand how to sell businesses and will always operate in your best interests to guide you through what can be a complex process. Naturally we look to maximise the cash payment on completion, however in order to achieve the best possible price you need to be mindful of the various sale  options that might arise. Tax is always a concern for business sellers and, whilst not tax experts, we are aware of the tax implications of different transaction types – ultimately we will always advise you to take independent & expert tax advice at the right stage in the process.

Some of the most common payment terms are outlined here:

  • Cash on completion– This is the most popular sale structure for business sellers, whereby payment is made upon completion. This works well for those business owners looking for a clean break due to retirement for example or perhaps for someone suffering ill health. Once sold the buyer takes ownership immediately with a handover period agreed in advance on both sides.
  • Deferred payments– these allow the business seller to consider buyers, who otherwise cannot raise the money and can provide a quicker sale. For a buyer it enables them to pay for the sale from future profits. Using deferred payments means that instead of one lump sum, some of the sale price is paid after completion to an agreed schedule e.g. monthly, quarterly or annually. These payments should be unconditional and interest and security can be sought.
  • Earn outs– this type of sale means that an initial payment is paid when the business sale transaction completes. In addition to this there are subsequent performance-related payments which are made according to agreed conditions. These payments may be linked to company growth, or retention of customers and the seller may remain active in the business for a set period to help ensure the payments are made. Earn outs would enable the buyer to fund the sale through future business profits and can also enable the seller to achieve a higher price than from an outright sale. However, there is risk and this type of sale may not suit those looking for a quick or certain value on sale.
  • Investment or elevator deal– this type of arrangement can help growing businesses by effectively selling part of their company. A percentage of the business would be agreed as part of the sale and usually owners would stay active in the business and work with the new investor in order to grow the business. The original owner is likely to exit at a future point but with a smaller stake albeit in a much larger company.

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