Selling your company is a big deal. Most of the time, it's the sale of something you've poured buckets of blood, sweat and tears into – and it's only going to happen once.

The stakes are arguably even higher than when selling a house. It can feel as though there's a paucity of information out there about selling your company, whereas selling a house is (relatively speaking) a more familiar process for many of us.

Selling a company is one of those processes where you have to spend money to make it. Just as an estate agent gets their cut in a house sale, so there are several third parties who will assist the sale of your company at a price.

Because of this, the question of how much the sale will cost is of the essence – but it's not always easy to winkle out the answer.

In this article, we run through the costs you can incur as a seller. Depending on the amount of external help you seek, these can include an M&A (mergers and acquisitions) firm, solicitors and accountants.

However you choose to proceed, getting solid legal advice early on can be beneficial in making sure you get the deal you deserve.

M&A/corporate finance

Let's go back to the analogy of selling a company to selling a house. It is, of course, possible to sell your home yourself – but most people are happy (or willing) to pay an estate agent to advertise the property, show around potential buyers and negotiate the price.

M&A or corporate finance firms play a similar role when you're selling a company. It can be advisable to make the most of this external help to ensure the best outcome for your sale.

The difference is that in the world of property, there's one name for this service – estate agent. In the world of mergers and acquisitions, this type of firm has more names than the great god Shiva.

There are investment banks, M&A firms, boutique M&A firms, business brokers… They all do roughly the same thing but at different prices and with slightly different methods.

Whichever route you go down, it's going to cost you. Naturally, these costs vary. An investment bank's fees will – surprise, surprise – be higher than those of a business broker. But broadly speaking, the fee structure will look something like this:

Upfront fees

• A monthly retainer fee, to be paid until completion
• A fee for heads of terms
• A success fee when the deal goes through

Not all brokers exact all of these fees and the amount of each will vary from firm to firm. Sometimes, for instance, the success fee will be one per cent of the overall value of the deal. Other times, it will be calculated differently.

Another factor is how big your company is – because the bigger the firm, the lower the broker fees. From the M&A firm's perspective, the sale of a small company is a lot of work for minimal return, so they'll want to protect their interests with higher fees.

Solicitors

While the M&A is dealing with negotiations, sellers will often instruct a solicitor to take care of heads of terms and other processes.

"Heads of terms" refers to a document that serves as a summary of the deal. Usually just a few pages long, it sets out things like price, conditions that need to be met, due diligence and any changes to the company. This can be a useful document to have as a record in case of disputes further down the road.

Solicitors also prepare and review contracts, provide guidance related to due diligence and offer support with employment issues like TUPE transfers.

Having a solicitor to assist with this process can be invaluable – but it's the service obviously comes at a cost. You may hear people talk about the "one per cent rule", where the legal fees will be one per cent of the total value of the deal. While this is a reasonable rule of thumb, it's not always the case.

As with M&A fees, legal costs on smaller deals can feel steeper than on bigger ones – but as with an estate agent, you're essentially paying for peace of mind.

Accounting costs

Finally, there's the question of accounting. A buyer will want to scrutinise the company's accounts, finances and tax records to ensure they're getting a good deal. Accountants can also help to maximise the value of the sale and ensure tax efficiency.

If the seller has an experienced accounting team, they can make savings by keeping this process in-house. If they don't, they can employ an external accountant – and the cost of this will depend on how much work needs to be done.

That said, even a company with a strong, experienced internal team may find it helpful to get external help, especially with regard to the SPA (sales and purchase agreement) and the technicalities of accounting warranties.

Either way, accounting is an important step in the process. And it's important to get it right if you want to maximise the deal's value.

How can a solicitor help?

Selling your company is one of the biggest decisions you will make, so it's important to go into it with your eyes wide open.

Whether it's a (relatively) simple case of drawing up heads of terms or a more complex process involving commercial property or dispute lawyers, legal guidance can equip you with the facts so you know what the risks are – and get the best deal possible.

At Milners Law, we have a team of experienced, affordable corporate lawyers with a proven track record of success. We're on hand to help you sell your business and navigate the process from start to finish. If you're looking for legal guidance, please don't hesitate to contact us for a free, no-obligation consultation.