COVID-19 and Brexit leads to new opportunities for business owners

There are strong indications that many proprietors are seeking to diversify in the post-pandemic world, whilst others are looking to take advantage of the increased interest from overseas investors following the UK’s departure from the EU.


However, there is a lot more to consider than simply finding an appropriate buyer, as the sales process can be long and complex, with many legal and financial hurdles along the way.

Before you proceed, it is important to take stock of your current situation and better understand each stage of the sales process and what it entails.

Valuing the business

Ultimately, the true value of any business is the amount a buyer is willing to pay. Therefore, it is important that you arrive at a fair valuation, which has been calculated using a range of approved methods.

These methods include, an asset valuation (appropriate if the business owns assets such as plant and machinery or a property), price-earnings ratio (P/E ratio), discounted cashflow, and the cost to the buyer to enter the market. In addition to this, you should always seek professional advice from an experienced financial adviser, as this will help you overcome any challenges you encounter.


To progress a sale, several important documents need to be prepared and agreed.

  • Primer - a 'teaser' for prospective buyers that includes basic details about the business, USPs, customer base, existing key contracts, potential for future growth, turnover, gross profit and earnings before interest, tax, depreciation and amortisation (EBITDA).
  • Non-Disclosure Agreement (NDA) - confidentiality should be maintained in the early stages of a sale to protect the interests of employees, suppliers and customers, so potential buyers must be asked to sign an NDA before entering into more detailed negotiations.

Heads of Terms

Once the price and deal have been agreed in principle, all of the details should be confirmed using a Heads of Terms. Although not legally binding, this agreement sets out what has been agreed and becomes the roadmap for the deal to progress onto the next stages. At this stage, it is best practice to seek confirmation of the required funds, as this will save a lot of time and effort during the final steps of the process.

Due Diligence

The buyer will want to perform detailed due diligence on the business and investigate the legal, financial and commercial aspects of the business by raising questions of the seller.

The results of due diligence often form the basis of any warranties inserted into the final sales agreement and may result in the price being renegotiated if any issues arise.

Disclosure Letter

A disclosure letter enables the seller to protect itself against a claim for breach of the warranties set out in the Sale and Purchase Agreement (SPA).

The disclosure letter is the seller's chance to inform the buyer of any aspect of the business which may not be entirely consistent with the warranties being given.

The legal protection offered by the contents of the disclosure letter and simultaneously the SPA, ensures the buyer is entering into the transaction in full possession of the facts.

Sales and Purchase Agreement

The SPA is negotiated by lawyers and covers the most minute details of the deal, stipulating all additional documentation, what needs to be delivered (hard copy or online confirmation) and by whom.

It will also outline the exact amount the buyer has agreed to pay for the business, whether a fixed amount plus often a sum based on the future revenue or profit (an 'earnout'), and how and when payment(s) will be made.

An agreement setting out the involvement the seller may have with the business after completion may also be negotiated. The document will also include any employment contract changes to retain staff post-sale, whilst the SPA will include a restrictive covenant to stop the seller setting up in direct competition after completion.

One of the most crucial parts of the SPA are the warranties which offer a contractual, binding assurance as to the state of the business at completion. These cover everything posing a potential risk to the business, such as staffing, the accounts, litigation, tax, compliance matters, and IT systems.

If an issue has arisen during due diligence which gives rise to a cost, this may result in a renegotiation of the price or the seller being asked to give an indemnity in the SPA, meaning that if any cost arises post completion in relation to that indemnity, the seller will cover that cost.

The majority of warranties are valid between 18 and 36 months after completion, with tax reaching out for seven years. This offers the buyer ample opportunity to discover any breach with a financial cap on the monies that can be claimed in light of a breach so that they don't exceed the purchase price. This again emphasises the importance to the seller of instructing advisers who are experienced and able to carefully manage the due diligence and disclosure process to minimise the risk of a future claim for any breach that might occur.


Once all the necessary documents have been signed and the funds are in place, lawyers from both parties will oversee completion, arranging for the monies to be transferred and complete.

The entire sales process is complex. Getting it right will impact the return to the buyer from the long-term investment it has made, preserve the 'legacy' of the business and safeguard the monies that the seller receives against any potential claim.

To avoid any issues, it is important to seek legal and accountancy advice at the beginning of the process, so the experts can iron out any potential problems early on. Then, as you enter the final stages of the deal, it is important to ramp up the professional input to get the deal over the line in good time.

Startup Details

Startup Details


Wright Hassall

Wright Hassall is a regional law firm, providing legal services including: corporate law; commercial law; litigation and dispute resolution; employment law and property law. The firm also advises on contentious probate, business immigration, information governance, professional negligence and private client matters.

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    Leamington Spa, Warwickshire, UK
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