Reasons to choose Wilson Browne
- Free Initial Consultation
- Direct Access To Your Legal Team
You started your business – you scaled it, nurtured it and helped it grow. Now what? You may be ready to retire and reap the rewards of your hard work – but to do so you need to consider what happens to your business. When a key business leader retires, decides to sell, or simply takes a step back, succession planning ensures the right leadership is in place to encourage not only a smooth transition, but the continued success of your business.
At Wilson Browne Solicitors, our corporate solicitors have expertise in succession planning and will be on hand every step of the way to provide expert legal guidance and unparalleled support. To help you find out more about our succession planning services and the way we work, we answer some of the most common queries below.
Who is responsible for succession planning?
When it comes to the responsibility of succession planning in law, there are several key parties. First and foremost, most senior positions within the business (such as the CEO, board of directors and executive leadership team) should be involved in succession planning alongside professional advisors including your accountant, tax adviser, financial adviser and, of course, your solicitors that can work with you to create a clear plan and implement it successfully.
Succession planning has become a vital component in ensuring the long term survival of any business, and when it comes to taking a step back or retiring, it’s a matter that is wise not to overlook.
How is succession planning done?
When it comes to succession planning, there are a range of options available to you. These may include a trade sale, management buy-out or even setting up an Employee Ownership Trust and selling to your employees. As no two businesses are the same, no two solutions are the same and here at Wilson Browne we focus not on a ‘one size fits all’ approach but consider the needs of the business and the parties involved and work with you to find the right exit for you. This may involve a combination of strategies but by planning the exit properly, you can maximise your return on your hard work.
What is the process?
Find your buyer
Identify who could be a potential buyer (e.g. competitors, suppliers or existing management team) and approach a shortlist of buyers either directly or through an advisor.Request that potential buyers enter into a non-disclosure/confidentiality agreement giving you peace of mind that any confidential information disclosed about your business remains safe.
Produce a sales/information memorandum identifying:
- Key financial information
- The industry your business is involved in
- How long you have been trading
- And details of employees
Draw up “Heads of Terms”
This is an agreement outlining the key terms of the sale.
Do your due diligence
Ensure both Legal and Financial due diligence are carried out. Lawyers and accountants will both undertake their own separate investigations so to ensure every aspect is covered.
Draft a sale and purchase agreement
Include a letter disclosing specific information about the business that the new seller will need to know (Disclosure Letter) – both these documents encompasses the terms of the sale, and information about the business being sold.
Organise a meeting for signing documentation to finalise the sale.
- Announce the transaction.
- Ensure Companies House is up to date with the correct information.
- Pay any stamp duty owed.
- Attend to administrative matters, such as insurance, payroll, PAYE, VAT and pensions.
What types of sales are available?
A trade sale is where you sell your company to an independent third party. This may be someone with prior knowledge of the industry or even specifically of your business, or it could be someone coming to it with ‘fresh eyes’. Due to the potential exposure, confidentiality and planning here is key so that you don’t give away trade secrets and leave yourself exposed.
Undertaking a trade sale will involve finding a willing buyer and agreeing terms in principle (your Corporate Finance, AKA CF, advisor can help with this), addressing due diligence enquiries, negotiating and agreeing the legal documents governing your transaction and commonly then dealing with post-completion handover. The nature and terms of a trade sale can differ vastly and include purchase price adjustments (such as a cash or net asset adjustment based on the financial position as at completion), earn-out provisions where you continue in the business following completion, deferred consideration, anti-embarrassment clauses to protect you from back to back sales, to name a few! The key thing is understanding your needs, your and concerns, and getting a deal that’s right for you and having a team of professionals that can help you navigate the various processes and pitfalls that you may encounter.
Management Buy-Out (MBO)
A management buy-out, or ‘MBO’ is the process of selling your business to a team of senior employees that are ready to take on the business. You can still expect a limited amount of due diligence, as there may be aspects of the business they need to know more about, but this should be vastly reduced. It also has the benefit of a smooth handover and better continuity as the buyers are already familiar with the business, customers, suppliers and staff. However, you are more likely to be agreeing to deferred payment terms (which is a risk to any Seller) and will still need the governing legal documents to effect the transaction.
Employee Ownership Trust
An Employee Ownership Trust, or ‘EOT’ goes one step further than an MBO, rather than selling the Company to a specific leadership team you set up a trust to hold shares for the benefit of all of your employees. If structured correctly, this can have significant tax advantages for both you as a seller and the employees. Ultimately, post-transaction your company will be employee owned and operated. However, you don’t have to sell all of your shares and commonly sellers do retain a minority stake. Effecting a transaction in this way can be a good way of maximising your value and return, and futureproofing the business as you’re not reliant on a specific team. Moreover, employees become engaged and incentivised as they all stand to benefit from the success of the business.
Share sale and Asset sale
In this scenario the company is sold in its entirety. It’s a deal which is inclusive of the business assets, liabilities, employees, contracts and property.
In this scenario the buyer can specify which assets of the business it would like to purchase.
How do you get your Business ready to sell?
Ensuring everything is in order before going to market will help to attract legitimate buyers and enable you to get the most out of the sale process.
Ensuring your paperwork is in order is one aspect of getting your business ready to sell.
In simple terms, if you were selling a house, you would ensure to mend your roof and fix your boiler…the same principles apply when selling a business. It is therefore important to ensure the below are up to date along with other contributing factors;
- customer and supplier contracts
- terms & conditions
- employment contracts (inc disputes and litigation)
- health & safety compliance
- data protection
- property leases
- internal shareholder disputes (if applicable)
Wilson Browne succession planning services
At Wilson Browne, we have a reputation for giving comprehensive legal advice whilst remaining approachable and pragmatic. We work with our clients to create a future plan that works in harmony to suit both your needs and the needs of the business.
Our expert team of corporate and commercial solicitors have years of invaluable experience providing our clients with comprehensive legal advice when it comes to succession planning. Our pragmatic approach and friendly team of lawyers will work with you to implement a plan that meets the specific needs of both you and your business.
Operating primarily throughout the East Midlands of the UK, you can access our succession planning services across both Northamptonshire and Leicestershire. Alternatively, we’ll also travel to meet you at a more convenient location to discuss your succession planning requirements in more detail.
If you want to end your search for an experienced business succession planning lawyer today, then please don’t hesitate to give our team a call on 0800 088 6004. You can also get in touch by filling out our handy online contact form – simply include your enquiry alongside your contact details and we’ll be in touch soon to find out more.