Business Law: 27 May 2025
Author: Leisa Bayston - Our People
Selling a business can be one of the most significant financial transactions most entrepreneurs will undertake. From a seller's perspective, success depends on thorough preparation, strategic decision-making, and careful risk management throughout the process.
Understanding what matters most can mean the difference between a smooth, profitable exit and a transaction that derails or leaves you exposed to ongoing liability.
The most successful business sales begin years before the actual transaction.
Early preparation allows you to address potential deal-breakers before they become problems; for example:
You may prefer a share sale for tax reasons, as the proceeds flow to you personally rather than being assessed at the company level. Share sales also avoid the complexity of transferring individual assets and assigning contracts. Although you should always review material contracts, including leases which may have a change of control clause which will need to be managed.
Where there is more than one owner of the business a share sales require careful consideration of stakeholder alignment. Address any pre-emption rights early, and confirm that the board has proper authority to proceed. Outstanding rights such as employee options or SAFE notes can complicate or derail transactions if not properly managed.
Communication with key employees, stakeholders and other relevant parties are critical to a smooth transaction and thought needs to be given to this in addition to any legal analysis of rights and process. Poor communication can create tension that threatens the entire transaction.
During due diligence, disclosure is your friend. The cardinal rule is to disclose more rather than less, as proper disclosure typically qualifies and limits your warranty exposure. Over-sharing protects you better than under-sharing, particularly given that disclosures made almost always qualify the warranties you provide.
However, this approach should be balanced against the risk allocation in your transaction documents. If the warranty caps, minimum claim values, payment terms, or security arrangements are sufficiently favourable to you as the seller, you might elect not to disclose certain unfavourable matters. However, you should always bear in mind there are broader laws that will apply should you mislead the purchaser (through action or silence).
All disclosures must be properly captured and traceable. Larger transactions often use purpose-built digital data rooms like Ansarada, an alternative is to maintain careful records through SharePoint and Excel. Remember that disclosure records may be needed years after completion, so the system must be certain, retrievable, and agreed between parties.
Consider requesting a modest exclusivity fee from serious buyers. This demonstrates their commitment to the process and helps cover your costs if buyers withdraw.
Your primary concerns should drive the negotiation, it is customary for you to hold the pen when drafting the transaction documents.
Three key areas we recommend you focus on are:
Often the risks and liabilities associated with selling your business does not end on completion day, some examples are:
Ultimately, successful business sales from a seller's perspective require balancing competing priorities: achieving maximum value while minimising risk and ensuring clean exit. This balance is achieved through early preparation, strategic disclosure, careful documentation, and post-completion vigilance.
The complexity of modern business sales, particularly those involving technology assets, intellectual property, and regulatory compliance, makes professional guidance essential. The cost of proper legal and financial advice represents a small fraction of the transaction value but can make the difference between a successful exit and a problematic transaction that haunts you for years to come.
Remember that selling your business is likely a once-in-a-lifetime transaction. Approach it with the seriousness and preparation it deserves, focusing on what matters most: getting paid, keeping your money, and walking away cleanly when the transaction concludes.
Whether you’re a buyer or a seller, if you have any questions, please contact Aitken Partners’ experienced and friendly Commercial Law Team on (03) 8600 6000 to discuss your options.