The owner's decision to sell. It is crucial for the company owner to consider the matter carefully before determining to sell. The long process of selling a firm rules out any indecisiveness.

Selecting a specialised company to see to the sale. A business brokerage must be selected which is specialised in selling companies - a business brokerage recognised for being professional and methodical.

A written agreement with the broker on the sales process. A written agreement must be made on selling the business, in order to specify the obligations of the owner who wishes to sell, as well as the obligations of the brokerage. Such a written agreement must contain a precise definition of the role of the brokerage as well as a clear explanation of its remuneration and any other significant factors in preparing an agreement that can prove useful to both parties. Remuneration for the sale is frequently performance-related and entails in part the groundwork and/or particular aspects of the sales process. The remuneration for groundwork and/or particular aspects of the sales process is generally irredeemable, should no sale result. In some cases, however, such remuneration may be deductible when settling the performance-related payments, if and when the business is sold.

Review - appraising the company's value. When launching the sales process, many find it desirable to prepare an appraisal, thereby providing a professionally founded valuation of the business. This assessment of its value takes into account international and technical procedures for calculating the value of the business, while also considering the situation in Iceland, including other trading which involves businesses of a similar type and size. Quite often, the broker is the ideal party for preparing an appraisal, review and valuation of the firm, prior to initiating the sales process. By carrying out such work, the broker gains background knowledge of the business to be sold, which improves the broker's success prospects and thereby benefits the seller of the business. Finally, such an appraisal may prove useful for the buyer too, since the buyer's chances improve after obtaining pertinent information on the business and its operations and finances.

Coordinating the ideas of the owner and broker on the selling price. When the business appraisal and valuation are ready, it is crucial for the seller/owner of the business and the broker to have similar ideas on a realistic sales price before undertaking the sales process.

The sales process. Ideally, the seller and the broker should come to a common understanding on how to approach the sale. What is usually considered sensible is for the brokerage to lead for the most part, or even entirely, the activities relating to potential buyers, while at the same time remaining in close touch with the business owner, who is kept well informed at every stage of the sales process.

Sales negotiations. When a buyer has declared her/his interest in purchasing the business, the stage of negotiations begins, whereby the buyer is informed about the firm and receives salient data on its operations. Normally, the broker is expected to manage the negotiations process to a substantial degree. The interested buyer must sign a confidentiality statement, affirming that any information which s/he obtains about company operations during these negotiations must remain confidential and may not be misused under any circumstances. Note that such a confidentiality statement nonetheless permits the party concerned to discuss this information with her/his certified auditor and solicitor, as well as with co-owners and/or the board of the company which s/he is representing.

Closing the sale. When the broker has reached a conclusion acceptable from the perspectives of both buyer and seller, the broker closes the sale. Doing so may take the form of a binding offer covering most of the major points, or of a signed, detailed agreement, depending on which suits best in each instance.

The sales agreement. The sales agreement must be prepared in a way that addresses most of the points related to the transaction. Commonly, the sales agreement will contain some reservations on the purchase, usually from one to several reservations. The most common reservation on purchasing a business regards the conclusion of due diligence, which the buyer conducts at her/his own expense. Other conceivable reservations might include financing or approval by the board and shareholders of the buying company, if a public limited company is involved.

Due diligence. Due diligence means checking into the material points and actual basis of what the buyer believes was being agreed on. In all cases, due diligence is carried out by a certified auditor whom the buyer picks for the job; the buyer also pays for the auditor's work.

The final sale agreement. When due diligence has been completed, either without leading to any criticism or else having resolved any dispute about the points which it brought to light, and after any other possible reservations have been dealt with, the final agreement is concluded. The final sale agreement cancels any such reservations, and the settlement of the purchase price now takes place. At the same time, operations are handed over from the seller to the buyer.

 

The sale of a medium- or large-sized company may take from three months up to as long as nine to twelve months, from the beginning to the end of the process, assuming that every step has received due attention.