How to sell a business in the UK
A well-run sale lines up preparation, confidential approaches, offers, due diligence and the legal documents while the business keeps trading. This is the full map for an owner.
Three questions to answer first
Before stage one there are three things worth settling, because everything else depends on them.
Why are you selling? Retirement, health, a disagreement between shareholders, an approach you did not expect or a need for capital to grow. The reason shapes the timetable, the type of buyer and the terms you can accept. Buyers will ask, so you need a clear and honest answer.
What do you need to walk away with? Work out the net cash you need for the next stage of your life and compare it with a realistic value range after debt, tax, fees and the way the price is paid. If the two do not meet, you need to revisit the timing, the preparation or the goal.
What do you want to do afterwards? Many buyers ask the seller to stay for a handover period. How long depends on how independent your management team is and on the type of buyer. If you want a clean exit, say so at the start, because it changes the process and the shape of the offers you will receive.
The eight stages
1. Objectives and a first view
Be clear about why you want to sell, by when and what matters most to you. For a first view, sector, size and approximate figures are enough. You don't need to name the company.
2. Valuation and preparation
Build a defensible range from normalised EBITDA, net debt and comparable deals. Get monthly management accounts, contracts and any tax or legal loose ends in order before going to market, and check with your tax adviser whether you qualify for Business Asset Disposal Relief.
3. Adviser and engagement letter
Compare experience of similar deals, the team, access to buyers and how each firm works. Agree scope, retainer, success fee, exclusivity and the tail period in writing.
4. Sale documents
Prepare an anonymous teaser, an information memorandum and a virtual data room. Each document gives a buyer only what they need for the stage they have reached.
5. Finding buyers
Identify trade buyers, private equity houses, family offices and search funds with real fit and funding, and consider a management buy-out or an Employee Ownership Trust alongside them. You review the list and can strike off anyone before approaches begin.
6. Approaches and indicative offers
First contact is made without revealing who you are. Once a buyer signs a non-disclosure agreement they receive the information memorandum and submit an indicative offer.
7. Heads of terms and due diligence
Compare price, structure, deferred consideration, earn-outs and the likelihood of completing. With the strongest bidder you sign heads of terms, usually with a period of exclusivity, and financial, tax, legal and commercial due diligence begins.
8. Share purchase agreement, completion and handover
Negotiate the share purchase agreement, warranties and indemnities, the disclosure letter and any completion accounts or locked box mechanism. Completion, payment and your handover period should all be set out precisely.
A realistic timetable
Put together, and assuming things go reasonably well:
| Stage | Typical duration | Who leads |
|---|---|---|
| Thinking it through and deciding | 1 to 3 months | You |
| Getting the business ready, if needed | 12 to 24 months | You |
| Choosing an adviser and signing the engagement letter | 3 to 6 weeks | You |
| Preparing the teaser, information memorandum and model | 2 to 3 months | Your adviser |
| Identifying and approaching buyers | 2 to 4 months | Your adviser |
| Offers and heads of terms | 1 to 2 months | You decide, your adviser negotiates |
| Due diligence | 6 to 12 weeks | The buyer |
| Share purchase agreement and completion | 4 to 8 weeks | The lawyers |
| Total from signing an adviser | 6 to 12 months, often longer |
These are guide figures. A buyer who is already lined up can shorten the process. Bank funding for the buyer, a National Security and Investment Act notification, poor information or a reorganisation before the sale can stretch it. Preparing the business can start years earlier and should not be confused with the formal sale process itself.
Why some deals never complete
Not every process ends at completion. There is no reliable industry-wide failure rate, because it depends on how a process is defined and when it is counted as started. Three causes come up again and again:
Expectations that do not meet. The indicative offers fall short of the value or the terms the owner had in mind.
Due diligence findings. A tax exposure, a key contract with a change of control clause or numbers that do not reconcile can change the price, the protections the buyer asks for, or whether the buyer proceeds at all.
A change of heart. A concrete offer can show the owner that they do not want to sell on those terms or at that moment. Being clear about your goals and alternatives beforehand avoids spending months on a deal you would never sign.
Decisions that can damage the outcome
- Going to market unprepared. It invites price chips, heavier warranties and delay.
- Selling off a falling year. Buyers extrapolate the trend, not the explanation.
- Only one buyer in the room. With no alternative it is much harder to test price, terms and certainty of completion.
- Granting exclusivity too early. Once you sign it, your options narrow and you depend on the buyer's timetable.
- Not reading the tail clause in the engagement letter. It can leave you owing a fee long after you have parted company with that adviser.
- Counting an earn-out as cash. It is contingent consideration, exposed to how the target is defined, how the business is run after completion and whether the buyer can pay.
Each of these is covered in more depth in our guide to twelve common mistakes when selling a business.
Frequently asked questions
Can I sell without an adviser?
It can work when a buyer is already identified, when you are selling to a competitor you know well or when the management team is buying. Ask yourself whether you can prepare the information, test alternatives, negotiate and run due diligence while still running the company. Even with a limited scope, you should have your own corporate lawyer and tax adviser.
When should I tell my employees?
The plan has to balance confidentiality and stability with any legal duty to inform and consult. On a share sale the employer does not change, so TUPE does not apply; on an asset sale it usually does, with formal information and consultation duties. Timing also depends on who needs to be involved in due diligence. Agree the approach with an employment lawyer, because there is no single rule for every workforce and every deal.
What if I only want to sell part of the company?
That is a real option. Selling a majority stake to a private equity investor and keeping a minority lets you take cash off the table and keep exposure to future growth. In return you give up sole control, so the shareholders' agreement, your rights on a future exit and the drag and tag provisions matter a great deal.
