Preparing
your Business for Sale in QLD
Selling your
business is an important decision. It is
important you have all the information you need when you decide to sell. Below are some things you might consider as
part of your pre-sale preparation:
1. Method of Sale
There are two main methods
of sale. First is the sale of the business assets themselves (most common),
which often (but not always) uses a standard form REIQ Business Sale Contract. Second is the sale of the seller’s
interest in its entity, for example, the sale of the seller’s shares in its company
or the sale of the seller’s units in a unit trust.
2. Due Diligence (Seller – looking at
the Buyer)
As the seller, you may
assess the likelihood of a prospective buyer obtaining finance to purchase your
business. It might also be wise to
consider whether you need to seek out a buyer with a certain level of financial
standing and with experience in running a similar business, as your landlord
may have certain requirements that the buyer (as a new tenant) must meet.
3. Confidentiality Agreement/NDA
(Non-Disclosure Agreement)
A prospective buyer
may request sensitive/confidential information about your business, so you may
wish to review this information with your solicitor and/or accountant before
giving a buyer access. It is often a
good idea to have the prospective buyer sign an agreement to better protect your
confidential information.
4. Structure of the Deal
Is the deal plus
stock (with a stocktake) or inclusive of any stock (a.k.a. ‘walk in walk out’)? Have you considered the GST status and is it capable
of being a sale of “Going Concern”? You
should seek professional legal and accounting advice, but to oversimplify, to
be a “Going Concern” both parties must be GST registered (or required to be),
and you as the seller must supply all of the things necessary for the continued
operation of the enterprise/business.
5. Your Lease
Consider whether
there are any outstanding ‘make good’ or ‘refurbishment’ provisions. Is the ‘Term’ of your Lease current (or are
you now, for example, a periodic month-to-month tenant)? Is there an unexercised option (that perhaps
should be exercised)? Should the lease
be registered on the title? Having a pre-sale
lease ‘check-up’ is a great idea, as lease issues can really affect the sale
process and ultimate outcome.
6. Plant and Equipment
What condition is your
plant and equipment in? You may need
special conditions in the Contract to account for this. Is the plant and equipment ‘unencumbered’
(fully owned by you)? Consider whether any
loan/finance needs to be paid out or whether the buyer is willing (and able) to
assume liability and step into your shoes.
7. Intellectual Property
Consider the
goodwill assets of your business and intellectual property (for example,
registered business names, domain names, phone numbers, trade marks, patents,
etc). A useful first step is to ensure
that any registrations have not lapsed/expired.
8. Due Diligence (Buyer – looking at
the Seller)
Consider what the
Buyer will want to look at. They may wish to see financial records (for example,
a Profit & Loss Statement and Balance Sheet [typically the past 24-36
months]), budgets and business plans, details of your accounting and other systems
(for example, Xero, MYOB, CRM software, automation software, etc). Other information which may be useful might
include utility accounts, supplier/customer details and insurance particulars. If you have been trading relying on any verbal/‘handshake’
agreements, it might be a good idea to reduce those to writing and consider
whether the buyer will be able to continue to benefit from those arrangements
(or not).
9. Employee Entitlements
What is currently
owing to your employees? Up-to-date
information will need to be available so entitlements may be adjusted at
settlement (if adjustment is agreed upon). What documentation is currently in place with
employees? This includes employment
contracts, policies, etc.
10. Restraint of Trade
A buyer paying for ‘goodwill’
will often want the seller restrained from opening up a new business in
competition to the buyer, for a period of time after the sale. An example of this might be a 25-kilometre
radius (area restraint) for three years (time restraint). As a seller, consider what you are willing to
offer. If you offer a more generous restraint,
will it increase the ‘goodwill’ the buyer will pay for and therefore the overall
price of your business? Do you need any
‘carve outs’ for activities you intend to continue after the sale completes which
should not breach the restraint?
Got more questions
on selling (or buying) a business? Feel
free to contact us on (07) 49 278 374 or email us at teamfox@foxlaw.com.au!
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