This article has been produced following the second session of the Ashtons Legal and Chadwicks Wealth ‘Strategic Exit Programme’ series, which explores how business owners can better prepare for succession, sale, and long-term value creation.

The human element

The emotional reality of a deal

For most owners, selling a business is a major step. It often brings uncertainty and a shift in identity, and emotional attachment to the business can make buyer behaviour feel personal. It can help to consider this ahead of time, to decide what your end goals are and whether there are any red lines that you won’t cross. Building a trusted advisory filter helps to reduce the turbulence and keep some distance from any emotional points.

Maintaining performance through change

The period between signing heads of terms and completion, and the early stages of new ownership, is often the most critical. Distraction is a real risk, and buyers closely watch performance. The business must therefore hold steady or improve during this period, even whilst the sale transaction is ongoing.

To avoid drift during a deal, spread the load between the management team and delegate where possible. Keep focus on trading and maintain internal communication. Identify “no-regret” commercial priorities that create value for the business, regardless of the transaction’s outcome.

The management team

Don’t underestimate the time commitment of a sale transaction. It is sensible to define clear management roles and responsibilities within the management team, both for the transaction and day-to-day operations. Share the load between the team where possible to avoid bottlenecks. Key roles here include the lead negotiator and, separately, the lead overseeing all information flow.

Alignment of the management team’s interests with the sale can increase your chances of achieving the best results. Often, not all of that team are shareholders with a share or proceeds to look forward to. Transparency with key people and facilitating their meetings with the buyer can help reduce uncertainty and build excitement about their future. Alongside such steps, financial incentives can help maximise performance when it counts, and they can be usefully tailored to reflect deal terms and the payment process (during both the sale process and any applicable earn-out). Share option schemes and direct contractual bonus entitlements can provide such financial incentives, and each will suit different circumstances.

Advisory team

To get the most value from your lawyer and financial adviser, speak to them before you commit to the buyer and before the deal timescale accelerates. A good advisory team helps you to identify opportunities, address issues in advance and avoid costly mistakes. If you are considering engaging corporate finance advisers, seek legal review of their terms. Ensure you have legal, tax, and finance advisers engaged before you sign the heads of terms (or an offer letter), so you can steer subsequent negotiations in the most productive direction.

Reviewing your assets (before the buyer draws its own conclusions)

Contracts

It is wise to ensure that your key contracts are up to date and reflect the current realities of your relationships with customers and suppliers. Also, ask whether the terms are reasonable and achievable, whether there is a change of control provision, whether those key contracts are stable and long-term, and whether the target company can terminate if needed. Improving the terms of such key contacts can be good business in any event, but it’s also good sales preparation.

Employment

The employment contracts of your most senior and key employees should be reviewed, particularly where an employee has been in post a long time without contract updates, or where informal arrangements are in place. Contracts should reflect current roles, comply with employment law, and include key business protections such as IP assignment, non-compete, confidentiality and notice clauses. Such contract updates can be softened for the affected employees by combining them with a discussion of incentives.

Real property

Sellers need to understand how business property is held, and this starts with a proper review of title deeds in advance of sale. Who owns the land (might it be an individual instead of the company), and are there any hidden nasties in the deeds, such as easements or covenants that prevent the buyer from using the land as intended? It is also very useful to understand any potential liabilities that attach to the property being sold (including dilapidations and repair obligations) and to factor them into early discussions with the buyer. Will such property even be included in the sale, or might a sale (perhaps to an owner’s pension fund) and lease back (to the business) create a preferable future income stream? Where a pre-sale transfer or other troubleshooting is required, allow extra time.

Intellectual property

Depending on the nature of the business (and how material IP is), this can be a greater or lesser focus. Ownership of material IP should be confirmed (it might sit with a founder rather than the company itself), third-party arrangements and rights checked, and, where appropriate, confirmatory assignments and other troubleshooting measures implemented prior to the buyer’s diligence flagging such things as causes for concern.

IT, digital & data

Buyers will expect strong, well-maintained IT systems. Owners should assess whether systems are scalable, whether appropriate policies exist for continuity, disaster recovery, cyber security, incident response, GDPR compliance, and data security, and whether the business can evidence robust controls through maintenance records, training, and awareness.

Cash

Owners should consider whether there is likely to be excess cash in the business at sale and, if so, how it might be best used and/or extracted. Tax advice is key here, and any specific approach discussed with the buyer. The earlier this is addressed, the more options there are likely to be.

Skeletons in the closet

As well as looking at your assets, consider what can be done about the hidden issues in your business.

Inaccurate statutory registers/ books are a common culprit here, and they are a crucial item to get right ahead of a business sale – as they are the ultimate legal authority of who owns the company (it is not Companies House or a share certificate!). Gaps or inconsistencies in these books can be serious and can kill a deal. Short of that, they can lead to time-consuming reconstitution work before the buyer proceeds, and to unlimited indemnities that put all risk on the sellers. It’s clearly best (and is a legal requirement) to keep on top of these as the company develops, but at the very least, the books should be checked as fit for purpose prior to the buyer’s diligence process.

Other liabilities should also be resolved in advance where possible. Existing or threatened litigation or disputes, investigations, or operational issues, such as past cyberattacks or data breaches, can result in price reductions, delayed payments, or onerous indemnities. It can be easier to resolve or at least mitigate these issues in advance, before the financial pressure and time constraints of a transaction force your hand.

Deal process

Value

Sellers should understand that the headline price will often not be the amount they necessarily receive. Throughout the sale process, value can be lost due to issues found during buyer due diligence, urgency forcing a non-optimal resolution, a weak understanding of deal mechanics, and asymmetric pricing of risk by buyers. Preparation, clarity and good management of buyer expectations can reduce that loss.

Where the situation allows for competitive tension among several potential buyers, it can help achieve a better price, and this is a scenario where corporate finance advisers can add value. There can be a fine line to walk between pushing buyers to improve their offers and pushing them away. A buyer will invariably want exclusivity before they fully commit to the diligence process.

Earnouts: the upside and the danger

An earnout defers part of the purchase price until agreed-upon targets are met after the completion of the purchase. It can bridge a valuation gap, but it also brings risk, including loss of control, unclear targets, dependence on buyer behaviour, and cultural or operational misalignment. If used, earnouts work best where targets are clear and measurable, the seller retains some control or influence, timeframes are short, and incentives are aligned.

The hidden risk of the deal

The risk of losing key people can be underestimated. Where such individuals leave during the sale, value can fall quickly. Buyers are buying continuity, not just numbers. Retention, clear responsibilities, aligned incentives, and transparent communication all help reduce this risk. Owners should also be prepared for culture shock after the sale, as governance, reporting, and decision-making often change.

Preparing for life after sale

For business founders tied to providing transition consulting services or otherwise working in the business after completion, the period after completion can be one of the hardest parts of the process. Moving from owner to employee or adviser often means less control, more governance, more reporting, and different expectations. Consider whether this is something that you are willing to do (perhaps in order to get the best ultimate price) or whether it is a red line.

Some final thoughts

Don’t go it alone – get the management team involved and engaged, and speak to advisers early enough to get the most benefit. Take proactive steps in advance to safeguard the value of your key business assets and reduce your risk exposure through the transaction. A buyer will be more positively disposed toward a switched-on, active seller who has taken steps to address issues in the business, and a strong buyer-seller relationship can pay dividends in last-minute negotiations.

The deal is not won in negotiation alone – it is protected in preparation.

Next steps

This article forms part of the Ashtons Legal and Chadwicks Wealth Strategic Exit Programme series – an in-person, small group workshop programme designed to help established SME owners strengthen leadership, governance and long-term planning, and to build a more owner-independent, transferable business.

The programme consists of three standalone workshops. You can attend individual sessions or complete the full sequence for a more comprehensive view of succession, exit readiness and what comes next:

• Session 3 – Transitioning the legacy (Wednesday 17 June, 3.30pm–6.00pm).

Each session is delivered in a small group format (limited places) to keep the discussion practical and focused. It is aimed at SME owners and directors who want to reduce key person dependency, strengthen resilience, and understand the steps involved in internal succession or a future sale, whether the transition is near-term or further ahead.

More information here: Strategic Exit Programme.