How to Sell Your UK Company — Step-by-Step Guide for Founders (2026)

Start Here: What Type of Buyer Are You Looking For?

The first strategic decision shapes everything that follows.

Trade buyer (strategic acquirer): A company in your industry or adjacent space acquiring you for strategic reasons — your technology, your customers, your talent, your market position. Trade buyers typically pay the highest valuations because they can realise synergies you cannot. Example: a larger competitor acquiring your customer base.

Financial buyer (private equity): A PE firm acquiring your company for financial return — they'll typically use leverage (debt), improve operations, and sell on in 3–5 years. PE firms typically require: minimum £2–5M EBITDA, demonstrated growth, and ideally a management team that can operate post-acquisition without you.

Management Buyout (MBO): Your existing management team (with PE backing) buys you out. Common when a founder wants to exit but the management team is strongly committed to the business.

Strategic exit to a platform: Some founders build specifically to be acquired by a platform company — a SaaS marketplace, an agency network, a sector rollup. If your company is built for this, position it accordingly from the start.

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24 Months Before Sale: What to Fix

Most companies that achieve disappointing valuations or failed deals have structural issues that could have been addressed with 12–24 months' advance planning.

• 1. Clean up the accounts:
• Switch to accruals accounting (cash basis is not acceptable to most buyers)
• Ensure 2–3 years of professionally prepared (ideally audited) accounts are available
• Remove any personal expenses run through the company — these raise red flags and reduce EBITDA artificially
• Normalise the accounts: show what EBITDA would look like without owner's personal expenses and above-market owner salary

• 2. Document all IP:
• Ensure trademarks are registered in the company's name
• Ensure all IP created by employees or contractors is formally assigned to the company
• Ensure domain names, social accounts, and digital assets are in the company's name

3. Reduce founder dependency: Buyers apply a "key man discount" when the business cannot function without the founder. Build management depth: hire or develop a capable team, document processes, demonstrate that revenue would not disappear if you left.

4. Lock in customer contracts: Recurring revenue under multi-year contracts is valued significantly higher than one-off or at-will revenue. Where possible: negotiate longer contract terms with key customers 12–18 months before sale.

5. Resolve any legal issues: Outstanding disputes, threatened litigation, HMRC enquiries, employment tribunal claims — these all need to be resolved or disclosed before sale. Buyers' lawyers will find them in due diligence.

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Engaging an M&A Advisor

For transactions above approximately £1M, using an M&A advisor (also called a corporate broker or corporate finance advisor) is strongly recommended.

• What an M&A advisor does:
• Prepares an Information Memorandum (IM) — a detailed document presenting your business to prospective buyers
• Identifies and approaches potential buyers (including buyers you haven't considered)
• Manages the process — running a structured auction creates competitive tension and maximises price
• Negotiates the headline deal terms on your behalf
• Coordinates due diligence
• Works with your lawyers to close

• M&A advisor fees:
• Retainer: £5,000–20,000/month during the process (credited against success fee)
• Success fee: 2–5% of transaction value (sliding scale — higher percentage for smaller deals)
• A £3M deal: success fee approximately £120,000–150,000. Worth every penny if they achieve competitive tension and get you 20% more than you'd achieve alone.

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Heads of Terms

• Once a buyer is identified and initial negotiations complete, you sign Heads of Terms (also called a Letter of Intent or Term Sheet). This is mostly non-binding but locks in:
• Headline price (and structure — cash, earn-out, share swap)
• Exclusivity period (typically 4–8 weeks — seller agrees not to talk to other buyers)
• Key conditions (no material adverse change, completion of satisfactory due diligence)

Earn-outs: Common in founder-led deals. Part of the price is contingent on future performance. Example: £3M on completion + up to £1M if EBITDA exceeds £X in Year 1 post-acquisition. Negotiate earn-out terms carefully: ensure the targets are within your control, the measurement methodology is clear, and the period is short.

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Due Diligence

• After Heads of Terms, the buyer's lawyers and accountants conduct due diligence — a forensic examination of your company. Typical workstreams:
• Financial DD: 3+ years of accounts, management accounts, cash flows, debtors, creditors, tax position
• Legal DD: Contracts, IP ownership, employment agreements, litigation history, corporate structure
• Commercial DD: Customer base quality, customer concentration risk, competitive position
• Tax DD: CT returns, VAT returns, PAYE records, any HMRC correspondence

Prepare a virtual data room (VDR) — a secure online folder containing all due diligence documents. Top VDR platforms: Ansarada, Intralinks, Datasite, Firmex. Or: a well-organised Dropbox/Google Drive for smaller deals.

Typical due diligence timeline: 4–8 weeks.

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The Share Purchase Agreement (SPA)

• The SPA is the definitive legal document governing the sale. It is typically 50–200+ pages. Key elements:
• Consideration: Price, payment timing, adjustment mechanisms (locked box or completion accounts)
• Conditions precedent: What must happen before completion (regulatory approvals, third-party consents)
• Warranties: Statements you make about the business (essentially a legal representation that your disclosures are true)
• Indemnities: Specific protections for identified risks (e.g., a specific tax claim you've disclosed)
• Limitation on claims: Cap on your warranty liability (typically 50–100% of consideration for fundamental warranties; lower for general warranties), time limits on claims (typically 18–24 months for general, 7 years for tax)
• Restrictive covenants: Non-compete, non-solicitation of customers/employees post-completion

Warranty and Indemnity (W&I) Insurance: Increasingly common even in mid-market deals. The buyer purchases W&I insurance — a policy that pays out if warranties are breached, rather than the seller paying personally. Allows sellers to receive sale proceeds "clean" and reduces the buyer's credit risk on warranty claims. Cost: 1–2% of deal value.

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Tax on the Sale

Capital Gains Tax (CGT) applies on the gain (sale price minus original cost of shares — typically nominal, e.g., £1 per share).

• Business Asset Disposal Relief (BADR): If you owned 5%+ of ordinary shares for 2+ years, were an officer/employee for 2+ years, and the company was a trading company: BADR reduces CGT to:
• 14% from April 2025 (up from 10%)
• 18% from April 2026 (planned)

BADR lifetime limit: £1M of qualifying gains. Above £1M: standard CGT rates (18% basic rate / 24% higher rate).

• Example — selling for £5M, shares purchased for £1:
• Gain: ~£5M
• First £1M at BADR rate (14% in 2025/26): £140,000 tax
• Remaining £4M at 24% (higher rate CGT): £960,000 tax
• Total CGT: £1,100,000 (22% effective rate on £5M)

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FAQs

How long does a company sale take? From instruction of M&A advisor to completion: typically 6–12 months. A clean, well-prepared business with a motivated buyer can complete in 4–6 months. Complex transactions, regulatory approvals, or difficult due diligence can extend to 18 months.

Can I sell my company without an M&A advisor? For deals under approximately £500,000: yes, you can negotiate directly. For deals above £1M: an M&A advisor's success fee is almost always recovered through a higher price achieved via competitive tension.

What is a locked box mechanism? A locked box fixes the company's financial position at a specific pre-signing date (the "locked box date"). The buyer pays based on the financial statements at that date, with no post-completion accounts adjustment. Simpler and faster to close than completion accounts mechanisms. Increasingly preferred by sellers.

What happens to my employees when I sell? Under TUPE (Transfer of Undertakings Protection of Employment) regulations, employees transfer to the buyer on their existing terms. You cannot terminate employees as part of a sale process to reduce headcount for the buyer's benefit — this is a TUPE breach.

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