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Finding a buyer for a share sale can be a difficult and challenging process. A share sale is a different process than an asset sale (which involves a transfer of assets from one entity to another). This is because it involves a third party taking over the existing structure you use to operate your business. 

As a result, the incoming buyer will also take over all assets and liabilities that sit in the company that operates the business. This means finding a buyer that is willing to take over all of the ‘skeletons’ in your company’s closet. The best way to find such a buyer is to utilise your existing networks or engage a professional business broker.

Utilising Existing Networks to Find a Share Sale Buyer

Key Employees

Consider the employees that work for your company. Are you aware of their career goals and future plans? A key employee working for you could be a primary candidate as a buyer. It can be particularly valuable bringing a key employee on as a shareholder and/or a director of your company to help achieve your exit plans. For example, you could offer equity to this valued employee in stages; their eventual takeover of your company being your succession plan. 

This could be the best option for you to exit, particularly if you operate in a niche industry within which it is difficult to find a suitable buyer.

If they are a key player in your business they most likely:

  • already know your business well;
  • are a responsible and dedicated member of your team (that you would trust to manage and operate the business effectively); and 
  • given their tenure with you, would be interested in taking over ownership of your business.

Suppliers and Customers

Finding a supplier or a customer to purchase your company may be an option for you if you:

  • operate a business that would complement the business operations of one of your suppliers; or
  • have a key customer that is heavily reliant on the products or services you provide to them.

For example, you may operate a cleaning product supply business that supplies a cleaning services business. This customer may benefit greatly from owning and operating your product supply business in the future.

Competitors

Competitors can be an excellent source of potential purchasers of your company. They may view the intellectual property, goodwill and customer database you hold as extremely valuable to the future of their own operations. They may also regard removing your company as a competitor as beneficial for their long-term growth and revenue purposes.

For example, you may own medical practice in an area that may be valuable to a national competitor. They may be interested in acquiring your practice as part of a number of acquisitions they have planned to bring different independent practices under their umbrella.

When approaching a competitor to purchase your company, be careful not to provide information that they could use to your detriment if the sale falls through.

If a competitor is your best option as a buyer, consider engaging a third-party intermediary. They can share redacted information about your business and your terms of the sale with them. This helps to add a layer of confidentiality to the process, particularly before you are certain that they are interested in your offer.

Pro-tip Box: To protect your business, have your potential purchaser enter into a detailed confidentiality agreement (also called a non-disclosure agreement) with you. It is essential you do this before providing them with any information in respect of the business or the company that they could subsequently use for their own personal gain. This is particularly important if you are looking to sell to a competitor.

Using Business Brokers to Find a Share Sale Buyer

Services

Business brokers can be an invaluable resource in finding a buyer for your company, particularly if you do not believe there is a suitable buyer within your existing network. Good brokers:

  • have experience helping other sellers in your industry;
  • understand the share sale process; and 
  • have access to wide networks in order to find a suitable buyer for you.

The services that they provide include:

  • preparing marketing material;
  • analysing your business information for valuation purposes;
  • advertising and marketing your business throughout their networks (including via online, newspaper and magazine listings);
  • qualifying and fielding offers to purchase;
  • managing the due diligence process; and 
  • assisting you, the buyer and your respective advisors to coordinate completion of the sale.

Fees

The fees that business brokers charge depend on the nature of their services and the terms of their agency agreements. Brokers are subject to legislation and regulations in respect of their conduct and the nature of the agency agreements they can provide. However, it is common for a broker to charge a commission (which is usually expressed as a percentage of the sale price of your company/business). This is either payable on completion of the sale, or payable if certain situations arise (i.e. if you default under your contract with the buyer, you may still be required to pay their commission). They might also charge fees upfront for advertising and marketing expenses.

Key Takeaways

Finding a suitable buyer to purchase your company can take some time. You want to ensure that you get the best price and commercial terms that you possibly can, which means it is worthwhile to consider all options available to you. There are a number of ways to find a buyer for a share sale. The best ways are:

  • by looking within your own network (as this means you will find a buyer who is already familiar with your business and its value); or 
  • by engaging suitable professionals to assist you (such as business brokers). 

If you need any assistance with finding the right buyer, contact LegalVision today and we can put you in touch with one of our business broker referral partners who can assist you. Our experienced business lawyers can also assist you with any legal requirements for the business sale. Call 1300 544 755 or fill out the form on this page.

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