Welcome to the third and final part of our Things to Consider When Selling Your Business series.

With a clear strategy and your business in order, you are ready to move into the transaction phase. While every transaction is different, the general approach is often similar and can be broken down into key stages.

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The transaction process

Selling a business involves a series of stages that guide the parties from initial discussions to completion. Understanding these stages helps you plan resources, manage timelines, and reduce risk. The key stages typically include:

1. Conduct a preliminary audit

At this stage, the parties engage in non-binding discussions to outline the transaction at a high level. Key considerations include financials, valuation, and other critical aspects of the business. Before sharing confidential information, ensure the buyer signs a binding and comprehensive non-disclosure agreement (NDA).

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2. Term Sheet

The next step is to usually negotiate and finalise a Term Sheet (or similar document). Generally non-binding (except for confidentiality and exclusivity), it sets out the in-principle agreement in greater detail and serves as a roadmap for the transaction.

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3. Due diligence

In addition to being prepared for the buyer’s due diligence (see Part 2 of this Sierra Series), we recommend that you undertake due diligence on the buyer. For simple transactions, this may be limited to checking for financial capacity to complete the transaction and pay the purchase price, but should be more comprehensive in more complex transactions, including if (for example) there is a partial sale, shares will be part of the consideration paid by the buyer, or there is an earn out period.

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4. Negotiate and draft transaction documents

The first draft of the sale agreement should ideally be prepared by your lawyer. Sale agreements (and associated ancillary documents) can be complex and involve substantial negotiation. Among other things, the sale agreement will likely include:

• Conditions: conditions that must be satisfied either before completion can occur or at completion (such as the consent of financiers, landlords and key customers and the release of encumbrances).
• Warranties: promises made by the seller (on which the buyer relies) in relation to the business, and (in the case of a share sale) the Company and its shares.
• Limitation of liability: provisions that limit the seller’s liability for claims made by the buyer (such as for breach of warranty).
• Restraints: restrictions on the seller’s ability to compete with the business for an agreed period after completion.

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5. Execution of the sale agreement

The parties execute and exchange the sale agreement, and a deposit may be paid at this stage.

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6. Completion and post-completion

Completion usually occurs several weeks after execution and exchange of the sale agreement, but the period between execution and completion will generally depend on the extent and nature of the pre-completion conditions that need to be satisfied (see above). Typical completion steps include:

• execution of ancillary documents;
• payment of the balance of the purchase price; and
• finalisation of the sale and transfer of assets or shares (as applicable).

After completion occurs, there are often additional matters to be dealt with, such as ASIC filings, registrations and purchase price adjustments.

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Client success story – Hampers with Bite

When brothers Rory and Nick Boyle from Hampers with Bite contacted us at Sierra Legal, they’d been approached to sell their business to an ASX listed company that was experienced in M&A transactions. They needed a trusted team who could match the ‘might’ of the buyer’s team and would keep their needs squarely in their sights. And we knew exactly how we could help.

As Rory and Nick hadn’t sold a business before, they needed a legal team they could trust to guide them through the sale process.

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The Process: How We Helped

We spent time with Rory and Nick to learn exactly what they wanted to achieve out of the sale, both commercially and personally. Keeping these goals in mind throughout negotiations, we were able to strategically manoeuvre to where these goals could be achieved.  

Rory and Nick felt in control of the process the entire time thanks to our ability to provide continuity through access to the same senior, experienced lawyers throughout. They knew they would be speaking to lawyers who were both invested in the process and who were fully aware of the progress of negotiations. We worked when our clients needed us to ensure a successful sale.

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The Outcome: Was it a success?

The business was sold for a good price, and on terms that enabled both Nick and Rory to achieve their personal goals. Added to that, they were equally pleased with the value they received for their investment, particularly given their overall legal spend for the transaction was around half that of the buyer.

“I had complete trust in Sierra Legal throughout the sale process.  The team understood my goals and delivered clear advice and effective solutions.  Their knowledge and skill in negotiating the legal documents was instrumental in the success of the transaction.”  

— Rory Boyle | Co-Founder, Hampers with Bite

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Feeling overwhelmed?

Selling a business can feel complex - but preparation and guidance make all the difference. To help, we’ve created a free 2-page guide that provides an overview of this series and key considerations for selling your business.

Download the guide here.

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What’s next?

We hope you found this series helpful in understanding the key considerations when selling your business. Keep an eye out for future editions of the Sierra Series, where we’ll continue to share practical insights for business owners navigating complex legal and commercial challenges.

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