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A large proportion of the M & A deals we deal with at Taylor Rose fall into the £1 million to £10 million range.
Unlike with smaller value deals, where the parties may have to take a highly cost conscious approach, potentially overlooking some issues and risks, transactions above £1 million generally attract experienced purchasers who will scrutinise every aspect of the business and negotiate very hard on every detail.
If you are considering or have decided to sell your business and are looking to sell in the value range above, here's what to plan for and expect, based on our experience.
A well-prepared seller is more likely to achieve a smoother sale and a higher valuation. Buyers will conduct extensive due diligence, so anticipating their concerns can prevent delays or price reductions. Consequently, as a seller, some months before you plan to sell your business :-
Get financials in order – buyers will closely examine the business’s financial health. Ensure accounts are up-to-date, tax filings are in order, and revenue streams are well-documented.
Instruct a solicitor - to conduct a pre-sale legal audit, identifying potential risks before due diligence begins. This can prevent negotiations from stalling later on.
Review contracts and key relationships – customer and supplier agreements, leases, and employee contracts should be scrutinised for potential red flags. Change of control clauses, in particular, can impact the deal.
Assess Intellectual Property (IP) and Regulatory Compliance – ensure all IP rights are documented and owned by the company, and that the business complies with relevant industry regulations.
Address liabilities – outstanding disputes, tax liabilities, or environmental issues should be resolved or disclosed upfront to avoid last-minute problems.
Prepare an Information Memorandum – provides potential buyers with an overview of the business, covering financials, operations, and growth potential.
Buyers will conduct detailed legal, financial, and operational due diligence before committing to the purchase. Expect scrutiny in the following areas:
Financial Due Diligence – A deep dive into profit trends, cash flow, liabilities, tax history, and financial forecasts.
Legal Due Diligence – Contracts, employment terms, regulatory compliance, data protection policies, and litigation risks.
Commercial and Operational Due Diligence – Market positioning, supply chain dependencies, and key customer retention risks.
Tax Due Diligence – HMRC compliance, VAT history, and tax structuring of the sale to avoid unnecessary liabilities.
Undisclosed liabilities (e.g., pending litigation, tax arrears).
Inconsistencies in financial reporting.
Over-reliance on a small number of key customers.
Weaknesses in intellectual property protection.
Non-compliance with regulatory requirements.
A proactive seller will anticipate these concerns, disclose risks early, and provide solutions to maintain buyer confidence.
The structure of the deal can significantly impact the seller’s financial return and risk exposure. Key considerations include :-
Asset Sale vs. Share Sale - Share Sale is often preferred by sellers as it transfers all liabilities to the buyer. Asset sales are often preferred by buyers to limit risk, but have a number of potential tax and other disadvantages for a seller.
Earn-Outs and Deferred Consideration - increasingly a key area - see our guides to deferred consideration generally and earn outs specifically.
Price Adjustments - the purchase price may be adjusted based on net asset value at completion. Sellers should ensure a fair and transparent mechanism is in place.
Restrictive Covenants - buyers will seek non-compete and non-solicitation clauses to prevent the seller from setting up a competing business or poaching key staff. These should be reasonable in scope and duration.
Warranties and Indemnities - buyers often seek broad warranties, shifting risk onto the seller. Open ended liabilities can be costly if not carefully drafted. If warranties prove incorrect, buyers may seek financial compensation. Warranty & Indemnity Insurance may protect sellers from future claims.
Unexpected Tax Liabilities
If you are considering selling your business and need legal guidance, contact our expert team today. We specialise in business sales and can help you achieve the best possible outcome.
Get in touch
If you would like to speak with a member of the team you can contact us on:
Partner - Corporate law
Nicholas is a Partner in our Corporate and Commercial team. He mainly operates out of Bedford, Peterborough, and London.
Nicholas qualified as a solicitor in 1995 with a City law firm. Since then he has gained significant experience in the City,...
