Most owners spend years building a business and only a few months preparing to sell it. That imbalance is costly. Buyers price risk, and every unanswered question in due diligence becomes either a reduction in price, a retention, a wider indemnity or a delay that gives the buyer time to reconsider. The sellers who achieve the best outcomes are almost always the ones who started preparing twelve to eighteen months before going to market.

Why preparation matters

A sale process tends to slow down at the same point: due diligence. The buyer's advisers will work through the company's records, contracts, people, property, intellectual property and tax position, and any gap they find will be reflected in the share purchase agreement. Issues that could have been fixed quietly and cheaply months earlier become negotiating points once heads of terms are signed and the seller has lost leverage.

Good preparation also protects value after completion. Warranties are only as safe as the disclosure made against them, and disclosure is only as good as the information the seller has to hand. A seller who understands their own business in detail can disclose fully and limit their exposure to claims later.

Put your corporate house in order

Start with the basics. The statutory registers should be complete and up to date, every share issue and transfer should be properly documented and filed at Companies House, and board and shareholder approvals should exist for key decisions. It is surprisingly common to find share options granted without the right approvals, or historic share transfers with missing stock transfer forms. These can usually be put right, but it takes time and sometimes requires the cooperation of former shareholders.

Check that the company's articles of association and any shareholders' agreement do not contain pre-emption rights, drag and tag provisions or consent requirements that will complicate a sale. If minority shareholders need to be brought along, it is better to understand their position early.

Review your key contracts

Buyers will focus on the contracts that drive revenue and those that create significant liabilities. Look in particular for change of control clauses, which may allow a customer or supplier to terminate or renegotiate if the ownership of the company changes. Where a small number of customers account for a large share of turnover, the buyer will want comfort that those relationships survive the sale.

Make sure every material contract is signed, dated and can be located. Informal arrangements that have never been written down should be documented while relationships are good.

Make sure the business owns its intellectual property

In technology and creative businesses especially, intellectual property is often the main asset being bought. It is also frequently owned by the wrong person. Code written by founders before incorporation, by freelancers or by overseas contractors will not automatically belong to the company. Written assignments should be put in place, and registered rights such as trade marks should be held in the company's name.

Get your people position straight

Employment contracts, bonus arrangements, share incentive schemes and any outstanding disputes will all be reviewed. Key employees should have up-to-date contracts with appropriate confidentiality and restrictive covenant protection. If the buyer expects certain people to stay, think early about how they will be incentivised through and beyond the sale.

Think about tax structuring early

Tax advice should be taken at the start, not at the end. Some structuring options, such as reorganising share capital, putting a holding company in place or crystallising reliefs, need to be implemented well before a sale and may not be available once terms are agreed. The difference between a well-planned and an unplanned exit can be significant, and our advisors can model the position alongside the legal work.

Prepare a data room before you need one

Building a virtual data room during a live transaction is stressful and error prone. Assembling it in advance, organised to reflect the buyer's likely due diligence questionnaire, lets the seller spot gaps, answer questions quickly and keep momentum. A fast, well-organised process also signals to the buyer that the business is well run.

What sellers should do now

Owners considering a sale in the next one to two years should:

  • Review the statutory registers, share history and Companies House filings.
  • Identify change of control and termination rights in key customer and supplier contracts.
  • Confirm that the company owns all of the intellectual property it uses.
  • Update employment contracts and consider incentive arrangements for key staff.
  • Take early tax advice on structuring and available reliefs.
  • Resolve, or at least document, any outstanding disputes.
  • Begin assembling a data room organised around a standard due diligence request list.

Key takeaways

Preparation is the single most effective way for a seller to protect price and reduce risk. The work is not complicated, but it takes time, and it is far easier to do before a buyer is involved than during a live deal.

If you are thinking about selling your business, or simply want to understand how ready it is, please contact Corporate partner Amelia Hart.