We welcome questions related to any of our services. If we haven’t already answered your question here, submit your question by clicking the button.
Please note that the answers here are of a general nature, and the advice may not apply in your instance. Make sure you get appropriate personalised advice that applies to your business before taking any action.
A data room is a secure location where all the due diligence information is held and made available for review. Originally, these were actually a room at your premises (or sometimes your accountant’s). Now, data rooms are electronic. PDFs and scanned copies (i.e., documents that can’t be altered) are uploaded with secure access for the buyer’s due diligence team to review.
See The Data Room for more information.
Yes, it can be. The post-purchase transition period where you stay in the business needs to be a clause in the Sale & Purchase Agreement (SPA). Both you and the buyer need to agree the terms before the SPA is finalised.
The standard handover period in the Standard REINZ/ADLS Sale & Purchase Agreement for a Business is two weeks, full time, and your time and costs for this two-week period are included in the purchase price for the business. If the buyer wants you for three months, you need to do some more negotiation. If the buyer wants you to work in the business, or even just be available to answer questions, after the two-week transition period then you should be paid for your time, and you’ll both need to agree the rate before the deal closes. Further, the buyer can only expect you to carry on doing what you were doing before they bought the business – you don’t have to do menial tasks or things you are not skilled or able to do.
It’s essential to also clearly define the terms of this arrangement, such as your specific responsibilities, working hours, and extent of authority. These details can be part of the overall Sale and Purchase Agreement, or a separate contractor agreement.
This topic is also discussed in Transitioning Out of Your Business.
I recommend you use the standard REINZ/ADLS Agreement for Sale and Purchase of a Business. This is a complete agreement in most cases, and pretty much every lawyer is familiar with it. If no broker is involved, your lawyer can provide this and also assist with any custom or special clauses. This is a copyright-protected and licenced document, so there will be a fee to use it, which your lawyer will charge.
Don’t use a bespoke agreement drafted by your or the buyer’s lawyer. This adds significant cost to both parties.
Due diligence is a comprehensive assessment of a business undertaken by a prospective buyer to understand the risks and opportunities the business presents. The process involves a thorough investigation and analysis of all aspects of the business.
Due diligence enables buyers to make informed decisions, finalise deal terms, and (ideally) avoid unexpected liabilities. It’s a critical step in the M&A process and often involves a team of experts including accountants, lawyers, and industry specialists paid by the buyer. The buyer may also plan integration of the business into an existing business post-acquisition.
Think of due diligence as a deep dive into the business, involving the examination of financial records, contracts, legal documents, operational processes, customer and vendor relationships, and talking to key employees, customers, and even suppliers. Due diligence generally occurs after the parties have a Letter of Intent (or similar) in place, or have a conditional offer on the table. The buyer wants to be satisfied that there are no hidden issues or undisclosed information that could materially impact the value or risk of the acquisition. The vendor needs to balance the buyer’s need to investigate with the vendor’s ability to provide the information in a timely fashion; maintaining the confidentiality of staff and customers; and ‘handing over the keys’ of the business before the deal is done.
While the two terms are often used interchangeably, there is quite a difference between the two.
Appraisals are designed as a quick method to set an approximate price of a business when planning to sell as a whole. They are often done – for free – by business brokers as a part of their marketing their brokerage services to you. The appraisal is a simple assessment based on historical financials and uses comparisons with other similar businesses recently sold.
A Business Valuation is a deeper, more comprehensive assessment of a company’s overall worth, encompassing a wide array of factors: its financials, operations, and industry factors. It involves a comprehensive review of the business, research into economic factors that add to or detract from value. Since it is more detailed and accurate, a business valuation can be used for a wider variety of purposes like buying a business, refinancing an existing business, or the sale of some shares to an employee or family member.
There are many factors you will need to consider when timing the sale of your business, like the financial health of your business, market conditions within your industry, your personal objectives and timeline, the competitive position of your business, and any impending industry changes. Your age, health, and emotional readiness play pivotal roles in identifying when to exit. You need to look holistically at all these types of factors. However, in general, the best time to sell your business is at the start of a revenue ramp-up. This might be a seasonal bump, or part of the broader economy. Your business will be more appealing to buyers when they see the recent month-on-month improvements.
No, TEQ does not undertake the sale of businesses.
Yes, TEQ provides cost-effective business valuations tailored to clients’ needs.
TEQ focuses on small and medium businesses.
TEQ specializes in critical business transactions such as buying a business, planning your exit or succession, and preparing a business for sale.
Questions submitted here will be anonymously posted as an Ask Me Anything question, with our answer, as soon as we can. If you would like a copy of our response emailed directly to you, let us have your email on the form above. The responses provided here are of a general nature only, and should not be relied upon without getting appropriate advice (e.g., from us, or your lawyer, accountant, or similar as applicable). We may alter your question for clarity/grammar/spelling when posted. We will not respond to inappropriate comments or questions.