Sell side preparation
Finding what a buyer will find, while there is still time to fix it and no counterparty watching.
Commercial and corporate
Deals and diligence.
In a business whose value is intangible, the transaction is mostly an exercise in proving that what is being sold exists and is owned. Buyers do not look for reasons to admire the business. They look for the places the seller stopped looking, and what they find there is negotiated into the price rather than into the conversation.
What this looks like when it goes wrong
The version sellers regret most is discovering, mid deal, that the asset the price was built on is not cleanly owned. Contractor built code with nothing signed, a brand registered in a founder's name, a licence from a supplier that ends on a change of control, or a key customer agreement that cannot be transferred. The value has not disappeared. It has simply moved to the other side of the table as a negotiating point.
The next is diligence that finds nothing because nobody asked the right question. A generic request list produces a large quantity of documents and no understanding of where the actual risk sits, which is usually in one supplier agreement, one old employment contract, or one exclusive arrangement nobody mentioned because it predates everybody in the room.
Then there is disclosure done at the end. Warranties are given, the disclosure exercise is compressed into the final days, and the seller ends up carrying risk that could have been disclosed away had anybody started earlier. Disclosure is not an administrative step at the close. It is the mechanism by which a seller stops guaranteeing things that are not true.
The version with no remedy at all is confidential material handed to a buyer who then walks away. Everything was shared because a document was signed and the process seemed to be going well. The signature obliged them to keep it confidential. It did not make it possible to prove later what they did with what they learned.
What actually decides it
Structure decides much of the work. A sale of shares carries the company across as it stands, with its history, its contracts and its problems attached. A sale of assets moves only what is identified and transferred, which means finding out which contracts can be assigned, what consents are needed and who has to agree. Which is workable is frequently decided by what can actually be moved rather than by what either side would prefer.
Chain of title is what a buyer really tests. Not whether the seller believes it owns the software, the brand or the content, but whether it can be shown, contributor by contributor and registration by registration. Gaps found by a buyer are worth far more to them than they cost the seller to close beforehand, because at that point the seller has no time and no alternative purchaser to fall back on.
Warranties, disclosure and remedy work as a single machine. What is warranted, what is disclosed against it, what happens if a warranty proves untrue, and what is practically available to make good are all matters of drafting. A warranty is only worth what stands behind it, and the difference between a seller who remains solvent and reachable and one who does not is the difference between a remedy and a piece of paper.
Then there is sequencing and confidentiality. What is revealed, to whom and at what stage should reflect how likely the deal is to complete, and the most sensitive material should be the last thing shared rather than the first. Where the buyer is also a competitor, that judgement becomes the most important one in the process, because some information cannot be returned once it has been read.
What we do
Diligence that asks the specific question
Looking where the risk actually sits in this business rather than working through a generic list.
Chain of title established
Ownership of code, brands and content shown rather than assumed, before somebody else tests it.
Disclosure done properly
Started early enough to reduce what the seller is guaranteeing, rather than rushed at the close.
Warranties and indemnities on the assets
The intellectual property and data provisions negotiated on the terms that actually matter to this deal.
Protecting what you show
Staged disclosure and confidentiality arrangements built for the possibility that the deal does not complete.
When to spend nothing
A speculative approach is not a reason to run a full clean up. Most conversations of that kind do not become transactions, and a business that reorganises itself around every expression of interest spends its attention on deals that never happen. The right response to an early approach is to establish whether it is real before opening anything.
That said, some of this work is worth doing whether or not a deal ever arrives. Assignments from contractors, registrations in the company name, clean registers and a record of what has been licensed in are all cheap, useful in their own right, and exactly what would otherwise have to be assembled under pressure. The expensive parts of preparation are the ones that only make sense for a live process. The cheap parts are simply good practice.
Commercial and corporate
More on commercial and corporate
- Commercial contracts
- Founders and shareholders
- Corporate structuring
- Joint ventures
- Commercial disputes
Before anything is sent
Positions harden the moment the other side takes advice, and the quiet routes stop being available once a demand has gone out. While nothing has been sent, everything is still open.