Want to sell your business but can’t find a buyer? Why not sell to your family, management team or employees?

Many business owners want to sell or retire but don’t know who to sell to or how to get paid what the business is worth. Many owners don’t realise that the most straightforward way to sell their business is to sell it to the people who are right in front of them – family members, management team or employees.

The corporate team at Harper Macleod has developed an exit strategy whereby a deal can be structured to allow an exiting owner to offer family members or those already involved in the business an opportunity to acquire the business, while controlling their exit and maximising value.

What is involved?

Typically, a pre-requisite for such a transaction is that the business is profitable. Provided that this is the case, the exiting owner can expect to be paid a lump sum at completion of the transaction and a proportion of the remaining consideration paid out over a set period of time. This flexibility allows the buyer to acquire the business without being required to raise funds personally or through a third party as it is effectively the business which is responsible for paying the debt to the exiting owner through future profits. Even with this flexibility around how the consideration is paid, Business Asset Disposal Relief should be available to an exiting owner (tax clearance from HMRC would be sought prior to the transaction) meaning the capital gains tax liability could be only 10% on the first £1m of consideration.

A further benefit to the exiting owner, should they choose,  is that they can maintain an interest in the ongoing running of the business. This will enable them to stagger their retirement and maintain a degree of supervision over the buyer to protect their interest in the business until they have received their deferred consideration in full. There are a variety of ways in which this can be achieved.

For the buyer, in addition to acquiring a business without having to fund the consideration, there is little disruption to day-to-day business operations as the buyer, or buyers, will likely be familiar with or already work in the business.

In short, this strategy can enable: an owner to achieve an exit and receive value; a buyer to acquire a business without having to fund the full consideration; there to be little impact on the day to day running of the business; and a straightforward sale process with the option to keep due diligence and buyer protections to a minimum. This means the owner’s exit is significantly less arduous and stressful, in contrast to a transaction with an independent third party.

For further information or to arrange to discuss, please contact Paul Macdonald, Partner Corporate, at [email protected].

Some recent publishable examples of transactions undertaken by Harper Macleod include:

• Dazzle & Inkspot Ltd – employee ownership – 2021 – “It is reassuring to have someone you can trust that takes great care in the preparation of all the necessary documentation, explaining where necessary its purpose in easy-to-understand language.” Martin Super, director, Dazzle & Inkspot Ltd
• AFL Financial Planning Services Limited t/a Advice for Life Financial Planning – management buy-out – 2021 – “Paul and his team guided us through the legal requirements for our management buy-out to process. They completed and prepared all necessary documentation and were extremely patient with us throughout the process. AFL wouldn’t hesitate to recommend Paul and his colleagues at Harper Macleod.” Lee Malin, director, AFL Financial Planning Services Limited

• Bara Windscreens Ltd t/a Alba Windscreens – 50% transfer to management – 2020 – “Paul Macdonald and Scott Milligan assisted from an early stage. They offered clear advice to Alba Windscreens on the transaction, helping negotiate the deal and guide the company through to completion. We were very happy with the professionalism and excellent service provided by them and we would recommend them to anyone.” Anne Reid, director, Bara Windscreens Ltd

• G3 Consulting Engineers Ltd – sale to management – 2019 – “Paul Macdonald and the team at Harper Macleod understood the type of transaction we wanted to do and helped plan it from an early stage, guiding the sellers through to completion. I’d recommend them to anyone looking to exit from their business using this form of exit structure.“ Robert Storey, former managing director, G3 Consulting Engineers Ltd
• Connelly Security Systems Ltd – family business succession planning – “Connelly Security Systems has been instructing Harper Macleod for a number of years now and the service provided is always of an excellent standard” Paul Connelly, managing director, Connelly Security Systems Ltd