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Selling a UK company as a going concern is a popular exit strategy for business owners. A going concern is a business expected to continue operating for the foreseeable future. Selling it as such means that the new owner can continue to operate the business without interruption. This type of sale offers several benefits for both sellers and buyers. This article will explore the benefits of selling your UK limited company as a going concern.
1. Enhanced Value
One of the most significant benefits of selling your UK company as a going concern is that it can increase the value of the business. This is because when you sell a going concern, you sell an established business with a successful track record. This makes it more attractive to potential buyers, who are often willing to pay a premium for an established company with a proven track record.
2. Reduced Risk
Another benefit of selling a UK company as a going concern is that it reduces the risk for both the seller and the buyer. As the seller, marketing your business as a going concern means you can exit it without worrying about its future viability.
The new owner can take over your business with its existing contracts, assets and employees, meaning they can hit the ground running without worrying about starting from scratch. This reduces their risk of failure as they can leverage the existing customer base, contracts and employees to continue the business’s success.
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3. Retention of Employees
Selling a UK company as a going concern also comes with the benefit of existing staff members. Any new owner will inherit the existing employees, who are already familiar with the business and its operations. This can reduce the disruption to the company during the transition period, as the new owner can benefit from the knowledge and experience of the existing employees.
By retaining key employees, the new owner can also reduce the risk of losing valuable knowledge and expertise, which can be difficult and expensive to replace. This can be particularly important within organisations that require specialist skills or knowledge.
4. Easier Financing
Selling a UK company as a going concern can also make securing financing easier. When a business is sold as a going concern, lenders typically see it as a less risky investment. This is because the company has a proven track record of success, and the new owner can benefit from the existing customer base, contracts and employees.
This can make it easier for interested buyers to secure financing for the purchase, as lenders are more likely to lend money to a business with a proven track record of success. This can also reduce the cost of financing, as lenders may offer more favourable terms for companies that constitute lower-risk investments.
5. Streamlined Process
Selling your UK business as a going concern can also offer a more streamlined process for both buyer and seller. This is because your business is sold as a single entity (including intellectual property and business assets) rather than a collection of assets. This can help simplify the sale’s legal and administrative process, reducing the need for individual contracts and agreements for each asset.
6. Peace of Mind
Finally, selling a UK company as a going concern can offer peace of mind. The main benefit is that you can exit your business without worrying about its future viability. Instead, you can be confident that the company can operate successfully under its new ownership.
Naturally, prospective buyers will have confidence that they can continue the company’s proven track record of success and generate good cash flow and future profit.
LegalVision’s Buying a Business: Guide to Negotiating Terms allows you to protect yourself by understanding which key terms to negotiate when buying a business.
Key Takeaways
Selling a UK company as a going concern offers several benefits for both buyers and sellers. It can increase the company’s value, simplify business financing, provide a streamlined process and offer peace of mind. Most business owners consider selling their organisation as a going concern to maximise its value and minimise the risk involved in the sale process. So naturally, expert lawyers can offer professional advice and assistance.
If you need legal assistance purchasing an existing UK business, our experienced business sale lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 0808 196 8584 or visit our membership page.
Frequently Asked Questions
No written law lists certain conditions for classing a business as a going concern. Because of this, potential purchasers can sensibly incur professional fees to carry out due diligence on this label.
Any existing business with a reasonable belief that it can continue operating within profit for the foreseeable future can classify itself as a going concern, regardless of size.
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