Malcolm ZoppiThu Mar 06 2025
How Long Does It Take To Buy a Business UK: Heads of Terms to Completion
Buying a business in the UK can take anywhere from a few weeks to several years. In some cases, the process has been completed in as little as 30 days, while in others, it can drag on due to complexities or unforeseen issues. For business buyers, understanding the timeline and key milestones involved is crucial […]
Buying a business in the UK can take anywhere from a few weeks to several years. In some cases, the process has been completed in as little as 30 days, while in others, it can drag on due to complexities or unforeseen issues. For business buyers, understanding the timeline and key milestones involved is crucial for making informed decisions. In this blog, we’ll explore the factors that influence the timeline, key milestones involved, and tips for expediting the process.
Factors Influencing Timeline
1. Lawyers
Professional advice from legal advisors can significantly impact the timeline. Experienced and responsive lawyers familiar with mergers and acquisitions can push the process along, while less proactive legal teams may introduce delays. It’s critical that both parties engage competent legal support to avoid unnecessary holdups.
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2. Complexity of the Deal Structure
The more complex the business sale deal structure, the higher the purchase price, the longer the process may take. If the deal involves multiple shareholders, earn-outs, or intricate tax arrangements, this complexity can extend negotiations, document drafting, and due diligence efforts. Simple cash buyouts, on the other hand, can often be completed much more quickly.
3. Size of the Target Business
Larger businesses typically require more extensive due diligence, involve more documentation, and have more complex legal agreements. Smaller businesses, with fewer moving parts, can often complete the sale process faster. For example, a small local business may only take a 12 weeks, whereas a larger corporate entity may take years.
4. Promptness of Seller and Whether Seller Has Support During Due Diligence
The speed at which the seller responds to requests can have a direct impact on the process. If the seller is well-prepared and has the necessary support from financial or legal advisors, it will speed up the process. If the seller is slow in delivering documents or unprepared for due diligence, it can add weeks or months to the timeline. Engaging a qualified business transfer agent can also facilitate the process by preparing essential documents and managing communication between vendors and buyers effectively.
5. Number of Advisors Involved
The more advisors involved on both sides—accountants, lawyers, tax advisors, and other professionals—the more coordination is required. While advisors add value to the deal by identifying risks and offering solutions, too many stakeholders can complicate communication and slow decision-making.
Type of Due Diligence Process (DD) Being Conducted
The scope of due diligence significantly impacts timing. Some buyers may request a full, comprehensive due diligence report that covers every aspect of the business, from financials to compliance, which can take longer to complete. Others may focus on selective areas, seeking only to highlight key risks or red flags. A more targeted due diligence process can accelerate the timeline by assessing the business as a going concern, ensuring its viability and worth during acquisition.
Key Milestones in the Business Purchase Process
To better understand the work involved and the estimated timeline for purchasing a business, here are the key milestones:
1. Heads of Terms Signed (Day 0)
The Heads of Terms (HoTs) is the first formal document in the process, outlining the principal terms agreed between the buyer and seller. Once this document is signed, it sets the starting point for due diligence and drafting of legal documents. This is typically day 0 of the transaction timeline. It is crucial to seek professional advice at this stage to navigate complexities and ensure all terms are clearly understood.
2. Due Diligence Questionnaire Approved by Buyer and Sent to Seller
Once the HoTs are signed, the buyer’s team prepares a due diligence (DD) questionnaire. The time taken to prepare and approve this questionnaire can vary but typically ranges from a few days to a couple of weeks, especially if there are multiple advisors involved.
3. Seller Discloses Requested Documents to Virtual Data Room
The seller is responsible for populating a Virtual Data Room with the requested documents related to business. This step can be as fast as a few days if the seller is organised, but it can stretch out to several weeks if there are many documents.
4. First Stage of Due Diligence Completed
Once the documents are uploaded, the buyer’s team will begin reviewing them as part of the first stage of due diligence for acquiring an existing business. This stage can last anywhere from a few weeks to a few months, depending on the complexity of the business and how much information is needed. After the initial review, it is common for buyers to send further enquiries to the seller.
5. Due Diligence Completed and Report Delivered to Buyer
The due diligence report is typically delivered within two weeks of the completion of DD. The buyer will then review the findings with their advisors and raise any further questions, which may extend the timeline depending on the complexity of the issues raised.
6. Draft SPA and Ancillaries Approved by Buyer and Shared with Seller
Following the completion of DD, the buyer’s lawyers draft the Sale and Purchase Agreement (SPA) and ancillary documents, which could include employment contracts, board minutes, powers of attorney, share certificate indemnities, and shareholder agreements. These documents are shared with the seller’s legal team for review and negotiation.
7. Form of SPA and Disclosure Letter Agreed in Principle
This stage can be the longest in the entire process. Negotiating the SPA and the disclosure letter can take anywhere from one week to several months, depending on the ability of both parties to reach compromises. It is at this stage that many deals fall apart if disagreements cannot be resolved. Don’t let that happen to your deal!
8. Exchange and Completion
Once the SPA and disclosure letter are agreed upon in principle, the deal moves to exchange and completion. This is usually a quick process once the documentation is finalised, and it signals the official transfer of ownership.
9. Post-Completion Procedural Matters
After completion, there are often post-transaction filings and procedures that need to be addressed, such as notifying Companies House or restructuring the business. These tasks typically take 2-3 weeks but can extend longer if restructuring is involved.
Final Answer: How Long Does It Take To Buy an Existing Business in the UK
A deal can take three to five months from heads of terms to completion, assuming:
all parties are properly represented,
there are clear, detailed heads of terms,
the deal hasn’t been overcomplicated,
the parties are willing to compromise during negotiations and maintain an amicable approach, and
the purchase price is below £2m.
Tips for Accelerating the Process
1. Detail the Timeline in Heads of Terms
Clearly outline a realistic timeline in the HoTs and ensure both parties agree to it. This will create accountability and provide a structured roadmap for both buyer and seller to follow.
2. Agree on Key Issues Early
To avoid drawn-out negotiations, aim to resolve key issues early on and capture them in the HoTs. This includes matters like price adjustments, warranties, and indemnities, which, if unresolved, can lead to lengthy delays later in the process.
3. Choose a Responsive Lawyer
Select a lawyer with a track record of being proactive and responsive. Delays often occur when lawyers fail to promptly respond to queries, delaying the back-and-forth process of negotiating legal documents.
4. Project Manage the Deal
The buyer should project manage the process, ensuring that all parties involved—lawyers, accountants, and advisors—are aligned and working within the agreed timeline. Regular follow-ups and keeping momentum can significantly reduce unnecessary delays.
5. Maintain Amicable Relations with the Seller
A deal will progress much faster if both parties have a good working relationship. Maintain open, constructive communication with the seller and aim to resolve disputes amicably, rather than letting disagreements derail the process.
Ultimately, the timeline for buying a business in the UK varies widely depending on several factors. However, with good planning, clear communication, and efficient advisors, the process can be streamlined, making for a faster and smoother transaction.