Business for Sale in Jersey: A Guide to Buying a Smaller Business

Buying an existing Jersey business is a great way to become a business owner.

Established businesses have a proven track record which can lessen the risks and increase the likelihood of success. However, if you do not enter the process with your eyes wide open, you could end up with problems you did not expect. There is much more to buying a Jersey business than answering an advertisement for a business sale. Understanding the financials, including annual revenue, is crucial for potential buyers. Each business listing should include its asking price alongside key financial metrics. Buying a business can be time-consuming and complex. Investigating the businesses for sale and their assets in detail is definitely in your best interest, as assessing the market, and considering your ability to take over the business and run it successfully. The thriving market for jersey businesses offers various opportunities for buying and selling. Given the complexities and legal nuances involved in purchasing a business in New Jersey, it is strongly recommended to seek expert legal and financial advice early in the process. This ensures a comprehensive understanding and informed decision-making. Rushing into a purchase without careful consideration and the assistance of experienced advisers both legal and financial is unlikely to be in your best interests.

Advantages and disadvantages of buying a Jersey business

In the previous section, I discussed the importance of thorough investigation and careful consideration when purchasing a business. Now, let’s delve into the specific pros and cons of acquiring an established Jersey business. Understanding these will further guide your decision-making process and help you weigh your options with greater clarity.

First and foremost, it is generally less risky to purchase an existing business than to start a new one from scratch.

Some advantages of buying an established business include:

▮ Obtaining a business with a proven track record. This reduces risk and increases the likelihood of a success;

▮ Obtaining a business with an established income flow; you don’t have to start from scratch;

▮ Having an established workforce;

▮ Having stock, customers and suppliers already in place.

Some disadvantages of buying an established business include:

▮ Possible issues with the business (which the vendor attempts to hide);

▮ Being misled by the vendor;

▮ Paying too much for the goodwill and other assets;

▮ Clients and suppliers jumping ship at the point of purchase.

Is it better to buy the assets or shares of a business?

There are two principal methods for buying a business. You can buy the assets that make up the business or the shares of the company that owns the business.

There are advantages and disadvantages to each option.

With an asset acquisition, anything you are buying such as the asset, the intellectual property and other assets will need to be transferred as part of the sale. While this can present additional issues regarding transfer of assets etc purchasers sometimes prefer asset acquisition because they get to choose the assets they wish to purchase and discount liabilities.

If shares are purchased, all of the company’s assets and liabilities are generally acquired lock stock and barrel. In other words terms the business as a whole will continue unaffected save for the change in share ownership of the company.

Carl Parslow | Partner

Do I need to carry out due diligence?

The simple answer is you should always carry out a review. This is for the reason that before you purchase business assets or shares in a business, you want to know what you are purchasing and what liabilities you may face and indeed how much the business is actually worth.

During the due diligence process, your legal and financial advisors can provide invaluable insights into the business’s true value and potential liabilities. While due diligence can sometimes be a lengthy process it is vital to ensure that you understand what it is you are buying.

Not all vendors will provide full and frank disclosure of all issues the business is facing. You should always be cautious.

Some of the major areas to evaluate may include (the list is not exhaustive):

▮ The real reason the vendor is selling The business;

▮ Valuation;

▮ Issues with & opportunities for The business;

▮ Impact of the sale on the business and its customers, suppliers and employees;

▮ Financials, sales, expenses and profits;

▮ Assets and liabilities;

▮ Key contracts;

▮ Employees;

▮ Clients & suppliers;

▮ Leases and or property assets

Signing the purchase agreement

It is always sensible to complete the due diligence process before finalising the purchase agreement. By completing the process, the purchaser is better placed to identify and deal with risks, and to amend the agreement to the transaction to deal with such.

In essence, you should ensure that (amongst other things):

▮ You understand why the vendor wants to sell;

▮ You know the value of the business and not overpaying;

▮ You know what assets are to be sold and that the vendor has the right to sell;

▮ You have all the information you need to fully understand the business, its operations, assets and liabilities.

▮ You have undertaken sufficient operational, financial and legal investigations;

▮ You have verified the vendor’s the business’ records and that you are satisfied with your own enquiries;

▮ You have adequate protections to ensure clients and or employees do not jump ship upon purchase;

▮ The agreement includes adequate warranties and other terms to protect you;

▮ You have assessed the likely future position of the business after you have bought the business;

▮ Any issues have been resolved to your satisfaction and recorded in the sale and purchase agreement where applicable.

Regardless of when you sign a purchase agreement, you should ensure that the agreement is tailored to the transaction and adequately protects you. You should always get detailed legal, financial and or tax advice before you agree to sign any agreement or you agree on terms of the purchase..

And finally, when entering into any negotiation to purchase either shares or assets of a business make sure you state that the transaction is ‘subject to contract’. This should go a long way to protect you from any obligations to the vendor should you decide not to proceed with the transaction.

Our team of experienced commercial lawyers is ready to offer their expertise. They can assist you in devising a strategic approach to effectively mitigate the risks associated with contracts customised to meet the unique needs of your business. Your success is our priority, and we’re here to support you every step of the way.

Buying an existing Jersey business is a great way to become a business owner.

Established businesses have a proven track record which can lessen the risks and increase the likelihood of success. However, if you do not enter the process with your eyes wide open, you could end up with problems you did not expect. There is much more to buying a Jersey business than answering an advertisement for a business sale. Buying a business can be time-consuming and complex. It is definitely in your best interests to investigate the business and its assets in detail, assess the market and consider your ability to take over the business and run it successfully. Given the complexities and legal nuances involved in purchasing a business, it is strongly recommended to seek expert legal and financial advice early in the process. This ensures a comprehensive understanding and informed decision-making. Rushing into a purchase without careful consideration and the assistance of experienced advisers both legal and financial is unlikely to be in your best interests.

Advantages and disadvantages of buying a Jersey business

In the previous section, I discussed the importance of thorough investigation and careful consideration when purchasing a business. Now, let’s delve into the specific pros and cons of acquiring an established Jersey business. Understanding these will further guide your decision-making process and help you weigh your options with greater clarity.

First and foremost, it is generally less risky to purchase an existing business than to start a new one from scratch.

Some advantages of buying an established business include:

▮ Obtaining a business with a proven track record. This reduces risk and increases the likelihood of a success;

▮ Obtaining a business with an established income flow; you don’t have to start from scratch;

▮ Having an established work force;

▮ Having stock, customers and suppliers already in place.

Some disadvantages of buying an established business include:

▮ Possible issues with the business (which the vendor attempts to hide);

▮ Being misled by the vendor;

▮ Paying too much for the goodwill and other assets;

▮ Clients and suppliers jumping ship at the point of purchase.

Is it better to buy the assets or shares of a business?

There are two principal methods for buying a business. You can buy the assets which make up the business or buy the shares of the company that owns the business.

There are advantages and disadvantages with each option.

With an asset acquisition anything you are buying such as the asset, the intellectual property and other assets will need to be transferred as part of the sale. While this can present additional issues regarding transfer of assets etc purchasers sometimes prefer asset acquisition because they get to choose the assets they wish to purchase and discount liabilities.

If shares are purchased, all of the company’s assets and liabilities are generally acquired lock stock and barrel. In other words terms the business as a whole will continue unaffected save for the change in share ownership of the company.

Carl Parslow | Partner

Do I need to carry out due diligence?

The simple answer is you should always carry out a review. This for the reason that before you purchase business assets or the shares in a business, you want to know what you are purchasing and what liabilities you may face and indeed how much the business is actually worth.

During the due diligence process, your legal and financial advisors can provide invaluable insights into the business’s true value and potential liabilities. While due diligence can sometimes be a lengthy process it is vital to ensure that you understand what it is you are buying.

Not all vendors will provide full and frank disclosure of all issues the business is facing. You should always be cautious.

Some of the major areas to evaluate may include (the list is not exhaustive):

▮ The real reason the vendor is selling The business;

▮ Valuation;

▮ Issues with & opportunities for The business;

▮ Impact of the sale on the business and its customers, suppliers and employees;

▮ Financials, sales, expenses and profits;

▮ Assets and liabilities;

▮ Key contracts;

▮ Employees;

▮ Clients & suppliers;

▮ Leases and or property assets

Signing the purchase agreement

It is always sensible to complete the due diligence process before finalising the purchase agreement. By completing the process, the purchaser is better placed to identify and deal with risks, and to amend the agreement to the transaction to deal with such.

In essence you should ensure that (amongst other things):