How Long Does it Take to Sell a Business in the UK?

If you’ve decided to move on to other ventures, or are considering retirement, you are probably asking yourself the question, “how long does it take to sell a business in the UK?” 

Whatever your reasons for selling might be, it’s useful to first consider the stages and potential challenges involved in a typical sale. From setting your objectives to completing post-sale tasks, there are legal and tax implications that must be resolved before a timescale can become clear.

Following these steps can help you to understand your legal obligations, maximise value, and better negotiate the entire sale process. Simplifying this complex topic is just one way in which Thursfields can help.

Timing Counts When Selling Your Business

How to Sell Your Business In Seven Stages

The question, ‘How long does it take to sell a business in the UK?’ becomes clearer when we start to define the stages involved. Each step plays a crucial role in the transition, and the overall process can be lengthy and complex. Specialist legal representation can help with this, as you can expect to receive guidance around complex matters like business valuation, employee contracts, tax implications, and more. The main stages are:

– Preparing for the Sale

When selling your business, it’s important to make it as appealing as possible. This will be easier if you can prove that you have a robust structure in place, a strong team, no ongoing supplier/employee disputes, and up-to-date accounts. You should also have:

• Proof of fully-functioning equipment and other business assets
• Up-to-date employee and supplier contracts and leases
• Minimal personal expenses
• Detailed intellectual property rights unique to your company  
• An efficient working business model
• A current and up-to-date employee handbook
• Ownership of any relevant trademarks or patents
• A clear idea of what kind of structure would be preferable to you.

You might also want to think about what happens during the transition to the new ownership. This could lead to you considering options such as a share or asset sale, mergers and acquisitions, or a management buyout.

– Researching Business Tax

Before making a thorough business valuation, it’s important to first consider the implications for capital gains tax (CGT) and VAT. Any profit made on a sale will incur CGT on anything above your allowance, and transfer of your VAT registration will need to be structured into the deal. However the following tax reliefs could help to offset the CGT burden:

• Business Asset Disposal Relief: If you’ve operated as a sole trader or business partner for two years, you could qualify for a lower 10% rate in CGT.
• Business Asset Rollover Relief: You can delay CGT when selling assets if you use the money received for new assets within three years.
• Incorporation Relief: This allows businesses to transfer certain assets to a company without incurring an immediate capital gains tax liability, provided specific conditions are met.
• Gift Hold-Over Relief: During the sale of a business asset, it’s possible to transfer the CGT liability to the seller if you either give away business assets or sell them at a reduced price. To do this, you would need to be a sole trader or partner. Shares can also qualify for this relief, as long as you don’t own the company and it isn’t listed on the stock exchange.

Finally, sole traders will need to inform HMRC upon the close of trading via an online form.

– Performing a Business Valuation

Your business valuation will need to take into accounts things like assets, profit projections, as well as industry and market conditions. There are several approaches you can take for a thorough business valuation, and your legal team will help you to find the most sensible strategy. 

However, valuing the business is by no means a guarantee of a set-price, as negotiations will usually be required to determine the final valuation.

– Preparing a Sales Brochure

A sales brochure contains the main selling points of your business. It should start with the key information — the type of business, industry, USPs, turnover and growth potential — before becoming more detailed. 

Additional information to include should be premises, assets, leases, and a guide detailing how it currently operates.

The quality of information included in your sales brochure can have a real impact on how long it takes to sell a business. Does it cover all bases, or are there gaping holes where data should be? If it’s the latter, it could cause serious delays.

– Getting Ready for Due Diligence

Another step best handled with legal representation, due diligence is there to heavily scrutinise the proposed sale. At this stage, it’s important to be completely transparent about liabilities, financial records (dating back three years minimum), all included assets, the number of shareholders, all relevant contracts, and business insurance. 

Any gaps in information found by the buying party could seriously threaten a deal. So comprehensive accounts will be required in order to pass due diligence checks. 

– Locating a Buyer and Negotiating

As you would probably expect, one of the main factors in how long it takes to sell a business is finding a buyer. There are many ways to do this, such as advertising on commercial websites or publications, or approaching a potential candidate directly. However, using a broker is often a preferred method, as it can save time, help with negotiations, increase your options, and, ultimately, lead to a better price down the line.

When it comes to negotiations, it’s advisable to research buyers and be realistic about your valuation. It’s important to ensure that any buyer has funds in place to complete the sale and you should look to maintain contact throughout. Finally, try to record as much as possible in writing. This is good practice to help reduce the chances of disagreements or misunderstandings later on.

– Completing the Sale & Post Sale

The final stage in selling your business will need to be overseen by a legal firm. They will help you to check over the finer details of the agreement and set a final date for the transaction. The agreements include:

• Purchase and Sale Agreements: These will set out the terms of the sale.
• Lender Documents: Should the buyer need to borrow money to fund the purchase, these will need to be reviewed.
• Lease Agreements: If leases are in place for the likes of equipment or premises, these agreements will need to be registered to the buyer.
• Bill of Sale: This is the document that confirms the transfer of business assets to the buyer.
• Non-Compete Agreement: It’s possible that you could be asked not to set up a similar, rival business in the (near) future.

Post-sale, there are further tasks to be completed. Firstly you will need to notify your workforce about the sale. It’s important to be compliant with TUPE and to give staff the opportunity to ask questions about the implications for the change in ownership. After consulting with your staff, you’ll also need to settle any outstanding tax obligations. 
For more information on preparing a business for sale, you can read our blog on the subject here.

How Long Does it Take to Sell a Business in the UK?

If you’re wondering how to sell a business quickly, it’s important to follow the steps we’ve discussed. Even if you diligently perform everything required of you, it’s unlikely that a sale will be completed in less than six months. In some cases it can take at least a year from end-to-end.

The most important factor in how long it takes to sell a business is preparation. If you’re clear on your objectives, have a realistic business valuation in place, screen the right buyers, and devise a transition plan, the process can be expedited. Most importantly, enlisting a legal team with experience of mergers and acquisitions, tax matters, commercial leases, and employment law should greatly simplify the process.

If you’re selling your business, Thursfields can help. Our team has advised upon a wealth of high value transactions and has experience in a broad range of industries and sectors. We offer a holistic service that covers everything from mergers and acquisitions to employment policies and post-sale tasks.

While we focus on achieving the best results for our clients, we also appreciate that selling your business might require sensitivity and pragmatism. A full-service law firm, we can handle every aspect of the sale, with immediate access to the likes of tax experts and forensic accountants. With in-house solutions for every eventuality, we will create a strategy that is built around you.

By instructing us as soon as you decide to move on from your company, we will do everything we can to reduce how long it takes to sell your business. Our team will use all of their expertise to spot potential pitfalls and ensure the entire process runs as smoothly as possible. 
For further information about how our specialist teams can help, contact us today.