Publish date

12 October 2015

FAQ: Corporate & Commercial

Selling a business

Q. Is this a good time to be selling my business?

A. Despite the pandemic, the mergers and acquisitions (M&A) market is still very much active. Many investors, as well as trade-buyers, are currently looking for businesses to invest into or to acquire.

Q. Who would be interested in buying my business?

A. Usually there are two groups of buyers – investors and trade-buyers. An example of an investor could be a private equity firm who is looking to invest in a business alongside management in order to grow the business in short order. An example of a trade-buyer could be a member of your supply chain who is looking to “vertically” expand its operations.

Q. How do I start the process of selling my business?

A. If you have already been approached by a buyer, it would just be a matter of agreeing the terms of the sale (including the price!), and ensuring these are legally documented.

If you do not have a buyer in mind, you may want to consider approaching a Corporate Finance house – who are specialists that provide financial advice on “exiting” a business. These Corporate Finance houses often approach parties they believe may be interested in your business in order to broker a sale.

Q. So I have a buyer, what next?

A. This is usually the stage that specialist M&A lawyers, such as our team at Thomson Snell & Passmore, would come in.

The three main roles of an M&A lawyer are to:

(i)    guide you through the sale process;

(ii)    assist you with the buyer’s due diligence (whereby a buyer will seek to review your company’s key documentation – such as customer agreements, employment contracts, accounts, etc. – to ensure they are happy to purchase the business); and

(iii)    ensure you are appropriately legally protected in respect of the sale.

Q. What are the key legal documents that I need for the sale?

A. This really depends on the nature and terms of the sale between yourself and the buyer. However, generally in an M&A transaction you can expect to see (as a minimum):

a) A business sale agreement – setting out the terms of the sale

b) A stock transfer form – to legally effect the sale

c) A disclosure letter – a letter which discloses known “issues” with the business

d) New employment agreements – if you or key employees are to be incentivised to stay and help grow the business

e) Consents – company consents, as well as any third party consents required by the buyer.

Q. How do I find out more if I would like to sell my business?

A. We would suggest you get in contact to discuss. There are numerous different ways of selling a business or seeking investment, and our M&A team at Thomson Snell & Passmore has extensive experience of guiding sellers (and buyers) through the process.

Q: I am the current owner of a Kent family business. My children have no desire to take over the business upon my eventual retirement, what other options are available?

Your desire to pass your family business onto one of your children is an aspiration held by many family enterprises. However, recent statistics show that, worldwide, only one in three family businesses manage to achieve a successful transfer of the business to the next generation.

If you don’t already have a succession plan in place and there is not a next generation family member engaged and ready to take over – then there are a range of options available to you. Whichever route you choose, it is important that careful thought is given to planning and exit strategy.

There are many dynamics in a family business that come into focus when considering your exit opportunities. In particular: the existing relationships and tensions within the family; skills and aspirations within the business; retirement plans and finances; taxation; wealth management and legacy.

Some options you could consider might be appointing a professional management team to run the business, widening out the business in terms of employee ownership, extending the business through careful use of franchising or using a family office to manage assets and invest in other businesses. However, the more common routes would be:

Management Buy Out:

A Management Buy Out (MBO), is where the current management team purchases the family business from you. Subject to the MBO team securing funding, an MBO will help you achieve a relatively quick exit from the business whilst also leaving the business to be run by the management team that you know and trust. This should help to achieve a smooth transition for the business, to keep the existing culture, and retain staff and customers.


Another option to consider is the potential merger of your business with another family business. There are a wide variety of potential benefits from a successful merger including financial growth, diversification and overall progression. It can also help to secure the long-term future of your business.

Sale of the Business:

Although viewed by many as a last resort, you may decide that the most appropriate option is the sale of the family business. The sale of your business may provide you with a clean exit, as well as a financial reward for the time invested growing the business.

If this is your preferred route, careful planning for a potential sale as early as possible can help to ensure that; the sale process is as smooth as possible, such that you achieve maximum value for your shares and obtain any applicable tax reliefs.

The options set out above are only a handful of the many potential routes available to you on an exit. Early planning and good communication within the family around succession plans and exit options are vital to the future success of a family business.


Q: What is the GDPR?

A: The General Data Protection Regulation (GDPR) came into force across Europe and the UK on 25 May 2018. It applies to nearly all companies, despite of your size. The GDPR is one of the most sweeping pieces of legislation that we have seen for some time, strengthening previous data protection laws and introducing new requirements, such as consent, data portability and the right to be forgotten and notification procedures for data breaches.

Q: What is the biggest penalty for a business?

A: Businesses can incur significant fines for breaching the provisions of the GDPR. Businesses can be charged up to 4% of the annual turnover if the GDPR is breached. This includes breach of the core principles such as consent, data subject rights and data transfers.

Q: What is the different between a data controller and a data processor?

A: You are a ‘data controller’ if you say how and why personal data is processed. You are a ‘data processor’ if you are the one processing the data on the data controller’s behalf. Just because you are a data processor does not mean that you do not have data protection obligations.

Q: What is the difference between personal data and sensitive personal data?

A: Personal data is data relating to living individuals, also known as ‘data subjects’, who can be identified from that data. It need not be confidential data. Personal data can include names, the addresses and other location data, telephone numbers, job titles, medical details and more.

There are categories of personal data or ‘sensitive personal data’ that require extra care, such as racial or ethnic origin, political opinions, religious or philosophical beliefs, trade union membership, genetic and biometric data, health data, and sexual or sexual orientation data.

Q: What is valid consent under the GDPR?

A: Under the GDPR, consent must be: “Freely given, specific, informed and an unambiguous indication of the data subject’s wishes … signifies agreement to the processing of personal data relating to him or her.”

In practice, this introduces a much higher compliance standard for obtaining a valid consent from individuals in comparison with existing DPA regulations. For this reason, it is inevitable that you will need to review and update how you obtain, record and manage your requests for consent.

Q: How long does consent last?

A: This depends upon the context. You will need to review the scope of the original consent and consider the individual’s expectations at that time. Consent won’t continue beyond:

  • where your purpose for obtaining the data has expired or changed
  • where your use of the data has changed
  • withdrawal of consent
  • if parental consent was originally obtained and the child subject comes of age.

Q: Do you need a Data Protection Officer (DPO)?

A: No, only organisations employing more than 250 people must have (DPO). Exceptions include public authorities, have core activities that require carrying out large scale systematic monitoring of individuals (e.g. private security companies carrying out surveillance), or have core activities that require carrying out large scale processing of special categories of data (e.g. a hospital’s use of patient data) or data relating to criminal convictions or offences, then you must appoint a DPO. This applies to both data controllers and data processors.

Q: My business partner and I run a successful company together.  We are both directors and each have a 50% shareholding.  We want to protect our shares should the unexpected happen and one of us dies.  How can we do this?

A: The death of a shareholder can create significant problems for a company like yours, but there are steps you can take to enable a surviving shareholder to retain control of the company should one of you die.

You and your business partner should make sure that your shareholdings are protected in your Wills.  Each Will should provide that in the event of death, the deceased shareholder’s personal representatives will give the surviving shareholder first refusal to buy the shares.

You might also want to consider obtaining life insurance policies, the proceeds of which would be used by the surviving shareholder to buy the shares.

You will need to bear in mind that if the company continues to grow and be successful, the life insurance premiums may become prohibitively expensive and the value of the pay out may not match the value of the deceased shareholder’s shares.  You could put in place a shareholders’ agreement which is a private contract entered into by the shareholders of a company.  It sets out how ownership of a company is structured and the way decisions are to be made by the shareholders and the directors.

The shareholders’ agreement could be drafted to provide that if a shareholder dies, their personal representatives will be forced to sell the shares to the surviving shareholder for the value of the insurance policy.  We refer to this as a ‘put and call’ option.  Of course, looking at it from the perspective of the family of the deceased shareholder – they could be forced to sell shares which might be worth much more in the future if the company continues to grow.

Therefore another option is for the company, rather than the surviving shareholder to buy back the shares from the personal representatives.  Company law does include a number of hoops that the company has to jump through before this can be done, but as long as the company has the cash to buy back the shares (or is able to borrow it) this can work quite well.

Other, more drastic alternatives include putting the company into liquidation on the death of a shareholder or selling it.

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