This may be based on their initial offer that they will state on their letter of intent (see next section). If the deal falls through, you would then move onto the potential buyer with the next highest offer.

6a) The Letter of Intent

The letter of intent is a document that is commonly prepared by the buyer. It is basically an agreement that says both parties intend to carry out the deal if the specified terms and conditions are met. The letter of intent will not be legally binding unless stated, but it is still a good idea to review it with your solicitor before you sign.

The content of the letter will cover the terms and conditions of the sale along with the price that the buyer is willing to offer, should investigation give no reason for reconsideration. The terms will usually state that they have access to your solicitor and accountant on request to retrieve reliable information about your business to help with their investigation. It should also state how long they require investigating your business (say, 6 weeks) to recover all the information they need. The document should also give terms for the deal falling through, for your benefit and the buyers. You should make sure that within the terms and conditions it states that any information they retrieve will remain confidential: remember the deal can still fall through at any time.

6b) Due-diligence

In the last section, we kept referring to the buyers' investigation of your business: this is known as due-diligence. It is a period of time where the potential buyer will investigate the business further including all the information and facts that you have given so far. If you prepared the business for sale well, you will have all the information (see Sellers Checklist) at hand so that it can be given to the buyer on request without delay. The time that the potential buyer will have for due-diligence will have been stated on the letter of intent and will have been negotiated if you felt that the time required was inappropriate.

Almost all of the information required will be paperwork, but during due-diligence, the potential buyer may want to liaise with your staff, accountant and solicitor (if used) for verbal comments and information. Most of the information will be reviewed by the buyers accountant and solicitor (where appropriate) and if they hire a business broker, they too will play their part.

The potential buyer will also want to physically view the business premises, operations and assets so that they can not only see that they are in good working condition, but to see that the value you have given for them is accurate.

At all times you should obey requests for information and any further assistance from yourself as they will feel suspicious if you deny them from anything they wish to see. If there are problems that you have not yet revealed, make the buyer aware of them now: it will look much better coming from you then finding out for themselves. On doing so, the buyer will be thankful of your honesty (although they may be unhappy about the news) and you should provide possible solutions to rectifying the issue: if there is a feasible solution, then the buyer may overlook the issue.

For a brief recap, the following will be investigated by the potential buyer:

• Financial information (including tax and liabilities)

• Premises and assets (condition, value, etc)

• Customers (relations, reliability, etc)

• Suppliers (relations, cost, etc)

• Licences and contracts (staff, leases, customers, etc)

• Intellectual property (trademarks, copyrights, etc)

• Employees (roles, key members, etc)

• Management (effectiveness, etc)

• Products and services

• Sales and Marketing (methods, costs, success, etc)

• The industry itself (history, present and the future)

• You

As the potential buyer dives deeper and deeper into their due-diligence, there is no doubt that you will sweat, but try to remain calm and patient: if you do become nervous, it is more than likely you have not told the buyer something they should know.

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