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Helping you to protect and maximise value.
The right exit strategy for you will depend on a range of factors, including:
This period can be demanding, both practically and emotionally, so it is important that:
Whatever type of exit you are considering, our role is to help you secure a clean exit, deliver peace of mind and achieve the outcome that is right for you.
All the shares of the company are sold by you, along with any other shareholders, to the buyer.
The buyer acquires the company in its entirety, including all assets, liabilities and obligations. Since only the ownership of the shares transfers from you to the buyer, there will be minimal outward change for any third parties who interact with the company.
A share sale typically takes between four and six months, with the key stages including:
Offer stage
Once a deal is reached, both parties sign heads of terms to outline the core commercial deal terms. As part of this the buyer will:
Due diligence stage
The buyer will carry out its due diligence to understand the company and what it is buying.
This typically covers legal, financial, commercial and other specialist due diligence, and the information obtained will inform:
Legal documentation stage
This is an intensive period, involving:
Exchange and completion stage
After both parties agree to the terms set out in the legal documents, they are signed and the exchange of contracts occurs.
If no gap period is needed – such as for regulatory or change of control approvals – completion happens at the same time, so ownership of the company is transferred to the buyer immediately.
When a gap between signing and completion is required, completion will occur once all conditions have been met.
Post-completion stage
Various housekeeping formalities will be dealt with, with most of these being for the buyer to complete.
Typically, selling the shares in the company provides a clean break for you, with no direct responsibility remaining. However, a buyer will expect certain protections from you so a key role is to manage, and limit, the sell-side risks so that you retain the value you are expecting.
Purchase price – at its simplest, cash is paid on completion, with no post-completion adjustment mechanism or deferred payments. Frequently though there will be post completion adjustments and/or payments, for example consideration based on completion accounts, an earn-out arrangement (usually tied to future performance of the company) or deferred consideration.
Contractual protections – the transaction documentation will typically include:
Your advisers can help limit your risk by:
All the shares of the company are sold by you, along with any other shareholders, to the buyer.
The buyer acquires the company in its entirety, including all assets, liabilities and obligations. Since only the ownership of the shares transfers from you to the buyer, there will be minimal outward change for any third parties who interact with the company.
A share sale typically takes between four and six months, with the key stages including:
Offer stage
Once a deal is reached, both parties sign heads of terms to outline the core commercial deal terms. As part of this the buyer will:
Due diligence stage
The buyer will carry out its due diligence to understand the company and what it is buying.
This typically covers legal, financial, commercial and other specialist due diligence, and the information obtained will inform:
Legal documentation stage
This is an intensive period, involving:
Exchange and completion stage
After both parties agree to the terms set out in the legal documents, they are signed and the exchange of contracts occurs.
If no gap period is needed – such as for regulatory or change of control approvals – completion happens at the same time, so ownership of the company is transferred to the buyer immediately.
When a gap between signing and completion is required, completion will occur once all conditions have been met.
Post-completion stage
Various housekeeping formalities will be dealt with, with most of these being for the buyer to complete.
Typically, selling the shares in the company provides a clean break for you, with no direct responsibility remaining. However, a buyer will expect certain protections from you so a key role is to manage, and limit, the sell-side risks so that you retain the value you are expecting.
Purchase price – at its simplest, cash is paid on completion, with no post-completion adjustment mechanism or deferred payments. Frequently though there will be post completion adjustments and/or payments, for example consideration based on completion accounts, an earn-out arrangement (usually tied to future performance of the company) or deferred consideration.
Contractual protections – the transaction documentation will typically include:
Your advisers can help limit your risk by:
All or some of the assets of the company which comprise the business are sold by the company (as seller) to the buyer.
If a buyer is concerned about unknown liabilities or certain business aspects, it may opt for a business or asset sale. This allows the buyer to cherry pick specific assets and liabilities, assuming only risks it understands and considers acceptable.
A business or asset sale usually follows the same steps as a share sale, but since assets, employees and contracts must be transferred to the buyer (often requiring third-party consent), more practical and commercial issues arise, often leading to a longer timeline.
For employees, the Transfer of Undertakings (Protection of Employment) Regulations are likely to apply and the employees will automatically transfer to the buyer on their current terms of employment, with the buyer becoming their employer. Specific obligations to inform (and potentially consult) employees about their plans will apply.
Once the process is complete, you still own the company – though it will probably be only a shell – and remain directly accountable for any remaining assets or liabilities, which will need to be addressed before you can proceed with liquidation or winding up the company.
A buyer will request similar contractual protections (except for a tax covenant) to those given on a share sale so the same key considerations will apply.
All or some of the assets of the company which comprise the business are sold by the company (as seller) to the buyer.
If a buyer is concerned about unknown liabilities or certain business aspects, it may opt for a business or asset sale. This allows the buyer to cherry pick specific assets and liabilities, assuming only risks it understands and considers acceptable.
A business or asset sale usually follows the same steps as a share sale, but since assets, employees and contracts must be transferred to the buyer (often requiring third-party consent), more practical and commercial issues arise, often leading to a longer timeline.
For employees, the Transfer of Undertakings (Protection of Employment) Regulations are likely to apply and the employees will automatically transfer to the buyer on their current terms of employment, with the buyer becoming their employer. Specific obligations to inform (and potentially consult) employees about their plans will apply.
Once the process is complete, you still own the company – though it will probably be only a shell – and remain directly accountable for any remaining assets or liabilities, which will need to be addressed before you can proceed with liquidation or winding up the company.
A buyer will request similar contractual protections (except for a tax covenant) to those given on a share sale so the same key considerations will apply.
A private equity investment typically has three workstreams:
(1) acquisition (including due diligence)
(2) debt financing
(3) equity funding arrangements
The key stages of (1) are substantially the same as a share sale.
Workstreams (2) and (3) run in parallel with the due diligence and legal documentation stages of a share sale.
Selling shareholders who are ceasing to hold ownership interests will not need to be heavily involved in workstreams (2) and (3). However, the following key stages apply if selling shareholders are retaining an ownership stake post-completion.
Debt financing
Typical key stages are:
Equity incentives
Typical key stages are:
Acquisition/SPA
The considerations that apply on a share sale, as outlined above, will also apply here.
However the approach taken by a private equity buyer will usually align with certain private equity norms and “market standards”. For example 100% cash up-front is very rare, certain pricing mechanisms are often preferred over others, and when negotiating warranties, indemnities and the tax covenant the buyer will also have one eye on its own exit in 3 to 5 (or more) years. It is important to select a legal adviser familiar with the approach taken by private equity buyers. A PE-seasoned adviser can guide you as to what a private equity buyer will and won’t accept, and how best to present your transaction terms and documentation in order to optimise your position.
Debt financing
Your legal advisers will work with you and your financial adviser to ensure that the legal documentation reflects commercially agreed terms and that the company can afford, and operate and grow while subject to, the terms of the financing. Your legal advisers will also seek to minimise personal exposure, e.g. when giving certificates confirming company solvency (which a lender will require).
Equity financing
Sellers retaining an ownership stake will need legal advice to explain and negotiate key terms, such as what happens if a seller leaves the company, how the company is to be governed and how the private equity firm can force an exit. Tax advice is also critical, to ensure that structures and terms in the equity financing documents are beneficial (or at least not detrimental) in terms of personal tax.
Deal execution
The three workstreams are often inter-conditional and will likely need to complete simultaneously. Professional advice and execution experience is critical to achieve a successful and smooth completion.
A private equity investment typically has three workstreams:
(1) acquisition (including due diligence)
(2) debt financing
(3) equity funding arrangements
The key stages of (1) are substantially the same as a share sale.
Workstreams (2) and (3) run in parallel with the due diligence and legal documentation stages of a share sale.
Selling shareholders who are ceasing to hold ownership interests will not need to be heavily involved in workstreams (2) and (3). However, the following key stages apply if selling shareholders are retaining an ownership stake post-completion.
Debt financing
Typical key stages are:
Equity incentives
Typical key stages are:
Acquisition/SPA
The considerations that apply on a share sale, as outlined above, will also apply here.
However the approach taken by a private equity buyer will usually align with certain private equity norms and “market standards”. For example 100% cash up-front is very rare, certain pricing mechanisms are often preferred over others, and when negotiating warranties, indemnities and the tax covenant the buyer will also have one eye on its own exit in 3 to 5 (or more) years. It is important to select a legal adviser familiar with the approach taken by private equity buyers. A PE-seasoned adviser can guide you as to what a private equity buyer will and won’t accept, and how best to present your transaction terms and documentation in order to optimise your position.
Debt financing
Your legal advisers will work with you and your financial adviser to ensure that the legal documentation reflects commercially agreed terms and that the company can afford, and operate and grow while subject to, the terms of the financing. Your legal advisers will also seek to minimise personal exposure, e.g. when giving certificates confirming company solvency (which a lender will require).
Equity financing
Sellers retaining an ownership stake will need legal advice to explain and negotiate key terms, such as what happens if a seller leaves the company, how the company is to be governed and how the private equity firm can force an exit. Tax advice is also critical, to ensure that structures and terms in the equity financing documents are beneficial (or at least not detrimental) in terms of personal tax.
Deal execution
The three workstreams are often inter-conditional and will likely need to complete simultaneously. Professional advice and execution experience is critical to achieve a successful and smooth completion.
Following a preliminary phase in which an investment bank, accountants and the company’s legal advisers conduct due diligence on the company, the company will publish a verified prospectus (or equivalent document) describing its business, disclosing key risks and the principal terms of any associated fundraise.
The structure of any associated fundraise may take a number of forms, ranging from a placing with institutional investors to a retail offer to a broader base of potential shareholders.
This process will be accompanied by a marketing campaign, managed by the investment bank, including a roadshow, to promote investor interest and calibrate the proposed valuation of the company.
On completion of the IPO, the company must also introduce corporate governance and reporting measures which are appropriate for a publicly quoted company.
These are broadly as follows:
An IPO is a lengthy process which requires significant management time.
Early engagement with an investment bank and legal advisers is key to ensuring that the preparatory tasks are executed in an efficient, co-ordinated fashion, reducing the burden on the company, while controlling timing, cost and execution risk.
This will also allow sufficient time to conduct rigorous due diligence and ensure accurate and comprehensive disclosures in the prospectus, mitigating the risk of subsequent claims by investors.
Following a preliminary phase in which an investment bank, accountants and the company’s legal advisers conduct due diligence on the company, the company will publish a verified prospectus (or equivalent document) describing its business, disclosing key risks and the principal terms of any associated fundraise.
The structure of any associated fundraise may take a number of forms, ranging from a placing with institutional investors to a retail offer to a broader base of potential shareholders.
This process will be accompanied by a marketing campaign, managed by the investment bank, including a roadshow, to promote investor interest and calibrate the proposed valuation of the company.
On completion of the IPO, the company must also introduce corporate governance and reporting measures which are appropriate for a publicly quoted company.
These are broadly as follows:
An IPO is a lengthy process which requires significant management time.
Early engagement with an investment bank and legal advisers is key to ensuring that the preparatory tasks are executed in an efficient, co-ordinated fashion, reducing the burden on the company, while controlling timing, cost and execution risk.
This will also allow sufficient time to conduct rigorous due diligence and ensure accurate and comprehensive disclosures in the prospectus, mitigating the risk of subsequent claims by investors.
A transition to an EOT involves moving from a founder or shareholder owned model to one where a trust holds a controlling stake for the benefit of employees.
Structuring/planning phase
A decision is made as to how much equity will be sold to the EOT (which must be more than 50%), whether the sale will be full or phased and how the purchase price will be funded. Most EOT transactions are funded primarily through deferred consideration in the form of loan notes, sometimes alongside external debt. Any pre-transaction steps, such as simplifying existing share classes or dealing with share incentives, are identified at this point.
Valuation phase
An independent valuation is obtained to establish the market value of the company, and this underpins the purchase price paid by the EOT. The valuation is tested against affordability, as the company must be able to service any deferred consideration over time without prejudicing the long-term health of the business.
Establishment of the EOT
A trust deed is drawn up that complies with statutory EOT requirements, defining the employee beneficiaries and the rules for participation. Trustees are appointed, typically involving an independent trustee, a company-appointed trustee and an employee representative or employee consultation mechanism. The trust must be fully in place before it can acquire shares in the company.
Approval stage
The sale is implemented through a sale purchase agreement between selling shareholders and the EOT. Board and shareholder approvals are obtained and constitutional documents are amended if necessary.
Completion
The EOT acquires its controlling interest in the company and the consideration is paid or deferred consideration instruments are issued. Statutory registers are updated and filings made.
Careful preparation and clear documentation are important. Key points include ensuring the purchase price and payment terms are workable, defining any warranties or other seller obligations appropriately, and making sure the trust arrangements are clear and practical. Co-ordinated legal and financial advice will help manage risk and support an orderly transition.
A transition to an EOT involves moving from a founder or shareholder owned model to one where a trust holds a controlling stake for the benefit of employees.
Structuring/planning phase
A decision is made as to how much equity will be sold to the EOT (which must be more than 50%), whether the sale will be full or phased and how the purchase price will be funded. Most EOT transactions are funded primarily through deferred consideration in the form of loan notes, sometimes alongside external debt. Any pre-transaction steps, such as simplifying existing share classes or dealing with share incentives, are identified at this point.
Valuation phase
An independent valuation is obtained to establish the market value of the company, and this underpins the purchase price paid by the EOT. The valuation is tested against affordability, as the company must be able to service any deferred consideration over time without prejudicing the long-term health of the business.
Establishment of the EOT
A trust deed is drawn up that complies with statutory EOT requirements, defining the employee beneficiaries and the rules for participation. Trustees are appointed, typically involving an independent trustee, a company-appointed trustee and an employee representative or employee consultation mechanism. The trust must be fully in place before it can acquire shares in the company.
Approval stage
The sale is implemented through a sale purchase agreement between selling shareholders and the EOT. Board and shareholder approvals are obtained and constitutional documents are amended if necessary.
Completion
The EOT acquires its controlling interest in the company and the consideration is paid or deferred consideration instruments are issued. Statutory registers are updated and filings made.
Careful preparation and clear documentation are important. Key points include ensuring the purchase price and payment terms are workable, defining any warranties or other seller obligations appropriately, and making sure the trust arrangements are clear and practical. Co-ordinated legal and financial advice will help manage risk and support an orderly transition.
“Any exit process will be intensive, but by working closely with you and your other advisers, we can help you to maintain control, guide you through the process and deliver a transaction that successfully achieves your goals.”
Dominic Davis Partner
Legal expertise across mergers, acquisitions, disposals and demergers – including complex and cross-border deals.
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Clear guidance on IPOs, secondary fundraisings and equity market activity for UK and international clients.
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Tailored support for private equity investors and businesses, with experience across sectors and international transactions.
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Advice on the tax-effective design, implementation and management of tailored employee reward structures, aligning with business goals and regulatory requirements.
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