One recent example involved the shareholders of a limited company (Seller) who signed up and paid a fee to a sales agent who agreed to market and advertise the business for sale and handle the legals connected with the sale through their associated solicitor.
I got to hear about it through their accountant as the sales agent had found a buyer who wanted accounting information. The first the accountant knew about the impending sale was the Seller excitedly telling him that the business sale was agreed. “Hang on a minute” said the accountant, “Have you considered whether a business sale is the best way to proceed?”
The Seller agreed it would make sense for the accountant to consider the best approach and having done so the accountant discovered that the tax bill payable by the Sellers if undertaking a business sale would be about £17,000 while if they did a share sale then their tax bill would be about £2,000. That didn’t include the further costs and time delay involved in winding up and distributing the assets from the selling company following an asset sale.
The Seller could immediately see that they would be better off if they structured the transaction as a share sale and they went off to talk to their sales agent….whose response was “ our solicitor doesn’t deal with share sales and anyway, the legal costs of a share sale will be around £15,000” – WRONG! The costs involved in an asset sale and a share sale can actually be very similar and depending on the type and value of the business can be less than £1,500.
This is one specific example and for other businesses it may turn out to be better to sell the assets but the message is that anyone contemplating a business sale really does need to take specialist advice. For more information please contact email@example.com