How to sell a business

Selling a business is a six-to-nine-month process with a fixed order: prepare the numbers and the story, appoint an adviser, approach buyers under confidentiality, take indicative offers, choose one and grant exclusivity, survive due diligence, negotiate the sale agreement, and complete — with a regulator's approval in between if the business is licensed. The price is decided mostly by what happens before any buyer is contacted.

Most owners sell once. Most buyers buy often. The process below is the one a buyer expects, run in the order that gives the seller the most leverage at each step: competition before exclusivity, disclosure before diligence, and the regulatory clock started early enough that it does not decide the timetable.

When should I start preparing to sell?

Twelve to eighteen months before going to market. Preparation is what moves the price: two years of clean, ideally audited, accounts; revenue that can be shown by customer and by month; contracts that are signed, current and assignable; a licence with no open findings; and a management team that can run the business without the owner, because a buyer is paying for a company, not for a person. A seller who starts the process with these in place gets a shorter diligence and fewer price adjustments; one who starts without them spends the process answering for gaps instead of negotiating.

Do I need an adviser, and what will they cost?

For any business worth more than a few million, yes. A corporate finance adviser prices the business, writes the information memorandum, finds and qualifies buyers, runs the competitive process and keeps the negotiation moving while the owner runs the company. The fee is usually a monthly retainer plus a success fee of 1–5% of the price, higher at the small end, with a ratchet above an agreed target. The adviser's value is competition: three credible buyers bidding against each other move the price more than any argument the owner can make to one.

How do buyers find out the business is for sale?

Through a controlled process, not an advertisement. The adviser prepares a one-page anonymous teaser and sends it to a list of twenty to sixty buyers — trade buyers in the sector, private equity funds with a platform, and the two or three companies the owner already suspects. Interested buyers sign a non-disclosure agreement and receive the information memorandum; those still interested submit indicative offers by a deadline, stating a price range, structure and conditions. From those the seller picks two or three for management meetings and a first look at the data room, then chooses one and grants exclusivity for the diligence. Every step narrows the field and, until exclusivity, keeps the price under competitive pressure.

What happens in due diligence?

The buyer verifies everything the memorandum claimed, at its own cost, over four to eight weeks. Its advisers work through the data room — financial, tax, legal, commercial, technology, regulatory — and raise several hundred questions; the seller's job is to answer them fast and completely, because delay costs both sides and every unanswered question becomes a price adjustment or a warranty. For a licensed fintech the regulatory folder is read first: the licence and its conditions, correspondence with the supervisor, safeguarding reconciliations, the complaints log. Diligence findings are normal and are usually priced rather than fatal; the exceptions are the things the seller knew and did not say.

What is in the sale agreement, and what should I fight for?

The price mechanism, the warranties, the indemnities, the conditions and the timetable. Fight for a locked-box price if the accounts are recent and reliable, so the number is fixed at signing; for warranties capped at a percentage of the price and limited in time; for warranty insurance if the buyer will accept it, which cuts the escrow and the seller's continuing liability; and for an earn-out measured on something the sellers still control after completion. Accept that specific risks found in diligence will be covered by indemnities outside the caps — that is the price of the buyer not walking away. Read the conduct-of-business covenants that apply between signing and completion: they decide whether the owner can run the company normally in the months before the regulator approves.

How long does it take, and what can go wrong?

Six to nine months from appointing an adviser to completion, longer if a regulator's approval of the change of control is required — allow three to four months for that, running in parallel with the diligence and the drafting. The usual failures: a buyer's financing falls through, a diligence finding the seller could have disclosed earlier becomes a trust problem, the business misses its numbers during the process because the owner was running the sale instead of the company, or exclusivity is granted too early to a buyer who then re-trades the price. A process with a second bidder kept warm, a management team running the business and a seller who disclosed the bad news first avoids most of them.

What is different about selling a licensed business?

The licence sets the structure and the timetable. It belongs to the company, so the deal is almost always a share purchase; a change of control needs the regulator's approval, which is a condition to completion and is applied for by the buyer with the seller's help; and the regulator's view of the buyer — its owners, its capital, its plans for the business — decides whether the deal completes at all. The seller should know before choosing a buyer whether the regulator is likely to approve it, keep the compliance function fully staffed through the process, and make sure the safeguarding and regulatory capital numbers in the data room are the ones the supervisor holds.