Buying a business: What you need to know

Stephen Attree outlines the most important stages that need to be considered in order to ensure the successful acquisition of a business.

For anyone who is preparing to buy a business, there can be many hurdles to overcome before the purchase is successfully completed. If each individual stage of the buying process is completed thoroughly and effectively, this can have an immensely positive impact upon the long-term success of the company.

Where do I start?

When you have decided to target a certain business that is up for sale the vendor will probably want to start by asking a few questions. They may want to ask you about your intentions and future plans. Showing them your seriousness and that you have the finance behind you to complete the purchase is important in the short term so make sure you’re prepared for this. The prompt appointment of professional advisers will help push matters forward quickly and effectively so you need to be on the ball with this too.

While being open about your own interests, plans and capability to follow through, the vendor must also be open about their own reasons for selling the business. There could be a multitude of reasons, usually dependent on the size, current ownership and structure of the business. Your advisers will help you ask the right questions such as why the business is for sale, the timescales involved, what the business will retain after it has been purchased and what changes need to be made.

Prior to committing to the purchase of the target business and once you have obtained the vendor’s reasons for selling, your team of advisers will help you with any further investigations that need to be raised.

Where do I get expert advice?

Throughout the various stages of the purchase you will need to take professional advice from your advisers. It is critical that you make sure they are well equipped to assist your purchase and keep your best interest at the head of the acquisition. Legal experts as well as finance specialists will be required in all stages of the process. They will aid with the due diligence review, ensure you have contractual protection, negotiate terms efficiently and consider employee terms as well as their pension schemes. 

Your legal adviser will manage the entire process on your behalf so checking that you are working with the right solicitor is extremely important. In order to foresee and deal with any problems before they arise you will need experienced professionals, who have extensive knowledge of the acquisition business and all its procedures.

What should my initial steps be?

As part of your first steps towards acquisition, you will more than likely enter into a number of initial agreements with the seller. For example, the buyer would normally sign a confidentiality agreement, at request of the seller, whereby they agree to keep all information about the target business private.

In addition, it is common for the key terms of the agreement to be set out in a non-binding document such as Heads of Agreement or Letter of Intent. Make sure you take advice from your legal adviser so they can assist you with any detailed financial and legal negotiations involved.

What is the due diligence review?

Your professional advisers will undertake a further stage of due diligence once both parties have signed the heads of terms. An affective and meticulous due diligence review can provide excellent foundations for the final negotiations. Strengthening your position as a buyer, it will enable you and your legal advisers to work together with the seller to close the deal in the most positive way for you and your new business.

What is a share purchase agreement?

A share purchase agreement (or business purchase agreement) is the principal contractual document which sets out the terms of an acquisition. It is traditionally drafted by a buyer whereas a seller will draft the business purchase agreement.

The sale agreement includes warranties, indemnities and completion arrangements as well as details about when the consideration will be paid and any restrictive covenants that bind the parties.

Other documents to consider

There will be other documents for you to consider throughout the process. For example, a disclosure letter will be a key transaction document in most private company share or business acquisitions. There will be other ancillary documents that need to be completed too, such as a tax deed.

Signing the contract

Completion of the acquisition and the signing of the contract may take place on the same day. However, don’t be concerned if there is a bit of a gap. There may be a break to allow time for conditions and other requirements to be fulfilled, for example, notifying staff members and regulatory authorities.

Before the share purchase agreement is signed, the board of directors of the seller and buyer should hold meetings to approve the terms of the acquisition. The signing of the documents may be referred to as ‘Exchange’. At this time the parties sign up to the agreement and agree to be bound by its terms.

Completion and post-completion

Completion is the time that the transaction formally takes place. There are a number of matters that can commonly arise including money transfers, release of charges, availability of signatories, funding agreements and the issue of consideration shares. These matters can sometimes cause problems so it’s important to bear them in mind. Having a well prepared completion agenda is advisable and will keep your matters organised.

This agenda should cover all actions or steps that must take place before and after completion. It should include information about all the items to be produced, delivered and handed over at completion as well as which documents need to be signed and by whom.

Post completion formalities will first and foremost lie with the buyer and will include payment of stamp duty, making necessary announcements and filing paperwork at Companies House.


It’s important to stay just as focused after you have completed the deal in order to drive your business forward. Complications can often arise post-completion, including staffing issues and contractual obligations so make sure all problems are dealt with quickly and effectively to ensure the business is run successfully from the word go.

Stephen Attree is managing director of MLP Law.

Further reading on buying a business

Ben Lobel

Delphine Hintz

Ben Lobel was the editor of from 2010 to 2018. He specialises in writing for start-up and scale-up companies in the areas of finance, marketing and HR.

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Buying a business

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