Fees will generally fall into three camps: accountancy, legal and broker fees.
1 – Accountancy fees:
These will usually be for the additional support required from your accountant for tax planning and support during the due diligence process once you have agreed a deal. If you have a good bookkeeping process and management accounts system in place, these additional costs can be kept to a minimal amount. However, when the accounting history of the company is more complex, our clients can spend up to £5,000 with their accountant.
2 – Legal fees:
As your business broker, we will draw up a detailed Heads of Terms document prior to lawyers being instructed in order that the details of the agreement well understood and agreed by both parties before professional costs are incurred. A well prepared Heads of Terms document also gives a clear instruction to the lawyers on what documentation needs to be prepared and the legal advice which is required, thereby keeping legal costs to a minimum for both sides. Clients often use our Heads of Terms document to secure quotes from their lawyer prior to engaging them.
Once you have agreed Heads of Terms with the buyer, you will need to engage an experienced commercial lawyer to review and agree the documents listed below:
- The Sale and Purchase Agreement (for the sale of the company shares),
- Any supplementary agreements such as a Consultancy Agreement or Employment Contract for your working for the company post sale (typically during the handover period)
- Shareholder agreements in the case of a partial sale of the shares
- Personal Guarantees from the buyer for any deferred payments due post completion of the deal, should these be agreed.
- The first draft of these documents is generally drawn up by the buyer’s lawyer for review by the seller’s lawyer.
As the seller, your lawyer will draw up a Disclosure Letter to list all the information that has been disclosed to the buyer in Due Diligence and declare any known issues. This is so that the buyer enters into the agreement knowing what they are acquiring. They will not be able to claim any compensation through warranties and indemnities for any issues mentioned in the Disclosure Letter.
Finally, if you own the freehold of the premises your business operates from and you agree to lease the premises to the buyer, your lawyer will need to draw up a Leasehold Agreement.
For the simpler deals within minimal earn-out clauses and no property transactions, sellers should expect to pay legal fees of £8,000 to £15,000.
We have a panel of law firms who we work with regularly and know to take a pro-active and pragmatic view to completing a deal, at the same time as offering you the advice you need on the risks of the deal. Do contact us for details.
3 – Business Broker fees:
Fees vary depending on the business broker you use and the level of service you are looking for.
Some business brokers and corporate finance firms will charge a significant amount upfront, ranging from £10,000 to £40,000, plus a success fee on completion of 3% to 5%. Others will offer a no sale, no fee policy but charge a higher success fee on completion of 8% to 12%; you will also need to watch out for cancellation fees should you decide not to sell for any reason.
At Hornblower, our fees are £2,500 on engagement, £2,500 on signing of Heads of Terms and 5% on completion of the sale. There are no cancellation fees. We sell over 80% of our sale assignments within 12-15 months, and over 95% of those which reach Heads of Terms go on to complete successfully.
We hope this article gives you a good idea of the fees for selling a business. Do contact us via the form below if you would like to discuss the sale of your business with one of our experienced business sale consultants.