How to sell your business

Hands holding keys and small model house.

When the time comes, there are various ways to sell a business.

1. Outright sale

1.1         An outright sale is probably the simplest way to exit a business. This approach makes sense when a founder, co-founder or family members have no interest in taking it over or when the owner no longer wishes to take the company to the next level, meet challenges that may have arisen or secure additional funding.

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1.2         There are two ways to sell out: an owner can sell the company’s assets outright, or he can sell his shares in the company. In the broadest of terms, share sales tend to benefit the seller while asset sales are more beneficial to the buyer.

1.3         Asset buyers are getting the company’s physical equipment, facilities and customers, as well as intangibles such as trademarks and goodwill, and as a result, are generally protected against prior claims against the business. For example, the previous owners would most likely be responsible if an environmental claim were made against their former property or if an employee hired by them brought a claim.

1.4         Share purchasers, in contrast, are buying the company itself and thus are exposed to all of its potential problems.

2. Selling to management

2.1         Selling the business to its managers is also a popular option. You might do this when your company has a trusted, entrepreneurial management team that wants to carry on the business or take it to the next level.

2.2         The biggest advantage of this strategy is that you don’t have to spend time trying to charm a buyer. The trade-off for an easier sale is that the price may be lower than what an outsider would pay.

3. Employees

3.1         If any employees are affected by the sale (e.g. a buyer acquiring a software company may only be interested in continuing to employ its developers and not its support staff), you must tell them about the changes, including when and why part of the company is being sold and details about the redundancy terms or relocation packages, if necessary.

3.2         Under the asset sale of a business, or part of a business, or where there is an outsourcing or ‘bringing in-house’ initiative, assigned employees transfer on the same terms and conditions of employment they enjoyed before the transfer, save for a limited number of exceptions. The new employer is required to step into the shoes of the old employer. Both sides of the asset sale/outsourcing or bringing in- house initiative are required to inform and, where appropriate, consult with their employees before the transfer.

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