How long does it take to sell a business in the UK?

The sale, stage by stage

A sale is a run of stages, and each one has its own pace. The ranges below come from KBS Corporate, a UK firm that sells business-sale services, so treat them as one adviser’s view of a typical process rather than a rule.

KBS puts the whole process at six to twelve months. Added end to end, the stage ranges come to more than that, which suggests stages overlap and few sales sit at the top of every range; legal drafting, for example, often starts while due diligence is still running.

Other sources land in a similar place. Unbiased, a site that matches people with financial and business advisers, says to expect a deal to take six to nine months at least.

The part before the clock starts

The six to twelve months usually starts when an owner decides to go to market. The work that decides how smoothly those months go often starts much earlier. Unbiased suggests starting to prepare a business for sale two years in advance.

The reason is simple. A buyer reads the business through its records, and Unbiased’s guide suggests gathering financial documents and tax returns going back at least three years for due diligence, or to the first year of trading for a younger business. Records cannot be improved backwards; a year that ends with messy accounts stays in the history.

Things that commonly take months to put right, rather than weeks:

• Profit figures that don’t match across the management accounts, the filed accounts and the tax return.
• Personal or one-off costs run through the business, which a buyer will want explained as add-backs (see EBITDA add-backs).
• Key customer or supplier contracts that were never signed, or that can be ended on a change of ownership.
• A lease close to expiry, or a landlord whose consent the sale will need.
• A business that depends on the owner for sales, relationships or know-how.

The exit readiness checklist goes through these areas one at a time.

Marketing: the teaser, the NDA and the memorandum

Marketing is often the stage with the widest range, because it depends on how many suitable buyers there are and how quickly they engage. The order is broadly the same in most UK sales.

1. An anonymous one-page teaser goes to a chosen list of buyers.
2. Interested buyers sign a non-disclosure agreement.
3. They receive the information memorandum, which names the business and sets out the detail.
4. Buyers ask questions, may meet the owner, and make indicative offers.

Time is lost here when the documents are not ready on the day a buyer asks for them, or when the figures in the memorandum raise questions that take weeks to answer. A buyer who waits a month for a reconciliation can lose interest or move to another deal.

The number of buyers approached also shapes this stage. A wide process, with many buyers reading the memorandum at once, can take longer to run but gives the seller more offers to compare. A narrow one, with a few buyers picked for fit, can move faster. Which suits a business is one of the first things owners commonly discuss with an adviser.

Heads of terms to completion

Once a price and structure are agreed in heads of terms, which are usually not legally binding apart from terms such as exclusivity and confidentiality, the buyer usually asks for a period of exclusivity and starts due diligence. Franklins Solicitors, a law firm that acts on business sales, says most SME sales complete within three to six months of heads of terms, and that larger or more complex deals take longer.

This is where the time goes in that window:

• Financial due diligence: the buyer’s accountants rebuild the profit figure and test each add-back.
• Legal due diligence: contracts, property, employment, intellectual property and any disputes.
• Third-party consents: landlords, lenders, and customers whose contracts have change-of-control terms.
• The buyer’s funding: a lender runs its own checks before releasing money.
• The sale agreement itself: warranties, indemnities and the disclosure letter are negotiated line by line.

What buyers ask in due diligence lists the requests sellers typically receive.

An illustration: two versions of the same sale

Illustrative only. The business, the months and the events below are invented to show how delays build up; they are not a forecast for any sale.

Take an invented engineering firm going to market in January. In the first version, its accounts reconcile, its add-backs come with invoices, and its main contracts are signed and current. Buyers get answers within days, heads of terms are agreed in April, due diligence runs for two months, and the sale completes in August: eight months.

In the second version, the same firm’s management accounts show a different profit from its filed accounts. The buyer’s accountants spend six weeks reconciling them, a key customer contract turns out to be unsigned, and the landlord takes two months to give consent. Completion slips to the following spring, and the buyer reopens the price on the way.

Neither version is unusual. The difference is almost entirely in work that could have been done before January.

What tends to shorten a sale

Nobody controls a buyer’s pace, but some things are commonly linked with quicker sales:

• Figures that agree with each other everywhere they appear, so the first round of questions is short.
• Documents gathered before marketing, not after heads of terms.
• Add-backs that are few, specific and backed by evidence.
• A clear view, early, of which consents the sale will need.
• Advisers appointed in good time: a corporate finance adviser or broker, a solicitor and an accountant who know the business.

Some owners like to see where their records stand before speaking to anyone. The free readiness check on teasr takes nine figures an owner already knows, with no sign-up and nothing to upload, and lists what a buyer is likely to question about them. It does not value the business or set a timetable, and it is not advice; an adviser can tell you what your own sale is likely to involve.