DUE DILIGENCE

Buying And Selling A Business

We review the organization’s accounts and other aspects to determine the status of the company and its financial value.

Buying And Selling A Business

Do you want to sell your company? We tell you the phases of a business sale and the precautions you must take.

There are many reasons why an entrepreneur may decide to sell their business: retirement, change in technology or in the regulations that affect the company, need for liquidity, etc.

Experts in Buying And Selling Businesses

We take care of the entire process for your peace of mind.

What does our service consist of?

1. Previous analysis

We review the current status of the target company by entering its income statements and balance sheets. In this phase of the service, we make a first approximation, which is very useful for the following steps.

2. Comparison (historical figures)

We contrast year-on-year data, such as net profit or sales evaluation, to see how the company has grown over time. This allows us to determine the type of business, its status, and the strength of the information presented in its reports. Thus, we see the development of trends or how management has solved problems in the past.

3. Accounting analysis

Business accounting is critical to understanding your situation. A thorough review allows us to know the status of your assets and liabilities, as well as the presence of failures or makeup attempts. It is an important step in determining the value of the company and its financial status.

4. Tax analysis

A healthy and up-to-date tax system is a good sign. However, we review this aspect thoroughly in search of defaults, outstanding charges and other problems. In this way, you avoid acquiring a company with issues with the treasury, which will have to be addressed in one way or another.

5. Labour analysis

We investigate the company’s organisation chart, the situation of the workers, the state of the management or if the salaries are balanced. This allows us to get closer to the productivity of the organisation and to know the strengths and weaknesses in the workplace.

6. Sectoral comparison

Once the investigation within the company is completed, we compare it with others in the sector. The objective is to determine your position, which will affect the final assessment. Only then will we know if it is a reference or one more.

7. Valuation reports

The work carried out crystallizes in these documents. In them, we provide the information collected, the value of the company, and the reasons that have led us to the conclusions set out. We record the annotations that we deem pertinent and recommendations to potential buyers.

8. Search for buyers

Finding the right buyer is as important as valuing the business. We pay attention to the organisation’s characteristics and its financial and employment status to find the best profile.

Buying And Selling A Business

Determine the optimal purchase price or if your prospects are adequate.

1. Steps for buying and selling companies

Business buying and selling processes are often complex and take place over long periods of time. On the other hand, the process will depend on what you want to sell: a part of the assets or the entire business, among other assumptions.

In general, we can distinguish the following phases in a business buying and selling process:

  • The signing of a confidentiality agreement or NDA (Non-Disclosure Agreement). When the sale of a company is carried out, confidential information related to it is delivered to potential buyers; in addition, the operation itself must remain secret so as not to harm the company, for this, the confidentiality agreement is signed. The agreement defines confidential information, prohibits its disclosure and establishes the penalties for the case in which the duty of secrecy is breached.
  • Signature of letter of intent. Once the parties have agreed on the basic aspects of the operation such as the price and conditions of the sale of the business, a letter of intent is signed by which it is agreed that while the due diligence is being carried out, the seller will not be able to negotiate the operation with third parties. Therefore, the buyer is given exclusivity while analysing the status of the company being sold.
  • Carrying out due diligence. In this phase, the advisers of the buyer or investor carry out a study of all the documentation related to the company from employment, commercial, fiscal, legal point of view, etc. The analysis determines the contingencies that may affect the sale of the company.
  • Private contract of sale or framework agreement. Depending on the type of operation carried out in this phase, various documents can be signed, such as a private sale contract that will later be raised publicly. The parties can also sign a framework agreement that establishes a partner agreement. The latter is usually used especially in cases where 100% of the company’s capital is not sold.
  • The signing of the public deed of sale. Finally, the parties go before a notary public to sign the sale of the shares or participation. This deed is not registered in the Mercantile Registry. One of the most important aspects of the deed of sale is the guarantees in favour of the investor, which cover the cases in which hidden liabilities arise from the company he has bought. Another important aspect that is regulated in the deed of sale is the resolution of conflicts that may arise between the parties. It is important to include whether they will be resolved by judicial means or by submission to arbitration, for example.
  • Tax payment. Once the operation has been carried out, it is necessary to settle the corresponding taxes: ITP, IRPF and IS.

2. Tips for buying and selling companies

Each of the parts in the operation of sale of companies must take a series of precautions. We see them below.

3. Tips for the buyer

The buyer of the company can follow the following tips:

  • Analyse the market and look for the opportunity. There may be economic or technological situations that represent an opportunity to purchase companies. For example, a financial crisis may mean a company has a viable business model but does not have liquidity. In this case, opportunities arise for buyers or investors.
  • Ensure exclusivity. The seller must commit himself not to initiate negotiations with a third party when it takes to analyse the transaction. This period can be used to carry out the due diligence process.
  • Do not deliver money without regulating it in writing. Suppose the buyer requires the delivery of money to guarantee that the operation will be carried out within a specified period. In that case, they must reflect the delivery of funds and the conditions of said delivery in a document.
  • Wait for the due diligence report to set the price. The due diligence report is beneficial to confirm that there is an opportunity to invest, know if there is risk in the investment, and define the sale price.
  • Do not forget that the sale involves a multitude of transmissions. The company is a set of things for which, when it is sold, shares and participations are also transferred: real estate and movable property, debts, insurance contracts, credits, intellectual and industrial property and contracts that are in force.

4. Tips for the seller

As for the seller, you can follow these tips:

  • Prepare the company for sale. As far as possible, it is essential that the company is healthy, that it controls expenses and generates income, and, above all, that it avoids significant investments. In other words, your company has to become an attractive business.
  • Stay at the helm of the company. Until the sale is effective, the business must continue its course, so you can not neglect the company while negotiating the deal.
  • Reserve resources. Remember that the sale of a company can be extended in time, between six and twelve months, so you must have sufficient resources to maintain the company during that time.
  • Assess the company from an objective point of view. In addition to being an economic operation, the sale of a company has an emotional component; therefore, when establishing the valuation of the business, it is crucial to have the help of experts who give an objective assessment.

In short, the sale of companies is a complicated process. Lawyers specialising in commercial matters must intervene to comply with the law and carry out the operation in complete safety.