Are you thinking about selling your day nursery? If so, you may well have lots of questions about the process and what’s involved. Read on for a summary of some of the key steps you’ll need to take to sell your nursery business successfully.

Step 1: What are heads of terms?

Often, the first step in the sale process for most businesses is agreeing the heads of terms. These outline the key details of the transaction, such as the price, payment structure, and proposed timeframe. You’ll need to review and agree to these terms before moving forward. Some heads are intended to be binding, whilst others are more guidelines to keep everyone on track. Our experienced company and commercial solicitors in Hampshire can help prepare or review and negotiate these to help right from day one of the transaction.

Step 2: Asset Sale or Share Sale?

As part of the heads of terms negotiation, or often before that stage, you’ll need to agree with your buyer whether to structure the transaction as an asset sale or a share sale. This will depend on factors such as your corporate structure and the preferences of the buyer. It’s important to seek early tax advice on the implications of each option.

In an asset sale, the buyer will pick the assets they want to acquire, such as employees, contracts, and property. The buyer is keeps any remaining assets, and liabilities, of the business. In a share sale, the buyer acquires the company warts-and-all, taking on all assets and liabilities. Share sales are often more complicated as the cash, lending, and tax are much more of a concern to both parties. As well as your solicitors, your accountants can help with this part, as there are often tax consequences to consider too!

Step 3: What is due diligence?

Once you’ve agreed to the heads of terms, the buyer’s team will conduct a due diligence review of your business. This will cover financial, legal, and tax information, so it’s important to have your paperwork organised and up-to-date. You’ll need to work closely with your accountants and solicitors to collate and present this information.

The buyer will be interested in all aspects of your business, including corporate structure, employee information, property details, and funding arrangements. They’ll want to understand any liabilities the business has, such as bank loans or finance agreements.

Even before you market your nursery business, our commercial solicitors can help get your affairs in order, ensuring you have all of the right policies and procedures, contracts and documents in place before the buyer starts investigating. Get in touch with our Hampshire company and commercial solicitors if you would like us to carry out a legal health check of your business!

Step 4: What happens with Ofsted on the sale of a nursery?

Ofsted will need to be notified of the change of ownership. This may include details of new nominated individuals or directors, depending on the nature of the sale. It’s important to notify Ofsted in good time ahead of completion to ensure all parties are aligned.

Step 5: What about the commercial property?

If the nursery occupies property under a lease from a third-party landlord, you’ll likely need to involve the landlord in the sale process. The lease may need to be assigned, or the buyer may want to enter into a new arrangement with the landlord, with you surrendering yours on completion of the sale. Make sure you have contact details for the landlord or their agent ready.

For a freehold property, this is generally more straightforward, as our commercial property team simply liaise with the buyer’s, and the lender if there is one, to sell the property to the buyer as part of the business purchase – no landlords or third party lawyers to deal with!

Alternatively, sometimes the seller keeps the freehold property, and may wish to create a lease for the buyer to occupy moving forward. Again, our solicitors and your accountants can provide helpful advice on the different options, and of course can prepare the documentation as required.

Step 6: Timeframe

The sale process can vary, and it’s often influenced by a number of factors. To ensure the transaction progresses smoothly, make sure you’ve prepared all key paperwork and notified your bank of the proposed sale. The process can take anything from weeks up to several months.

Prior to completion, as well as providing the buyer with the required employee information, the employees will need to be notified in good time, or consulted with, in accordance with the TUPE regulations, and this may need to be factored in to the timeframe as well.

Our team will also liaise with your lenders to ensure any bank loans are settled at completion, to ensure you sell the business “unencumbered” to the buyer. If left to the last minute, this can add time too – best to be in touch with your lender from an early stage.

Step 7: Transition

Finally, you’ll need to consider your involvement in the business after completion. The commercial terms agreed with the buyer will determine whether you’re required to remain involved in the business to facilitate a smooth transition. This could be via a consultancy agreement or fixed-term employment contract.

Next steps

Selling your nursery can be a complex process, but with the right advice and preparation, you can achieve a successful sale, with minimal stress.  At Scott Bailey LLP, solicitors in Lymington, we have extensive experience in helping business clients navigate the sale process, and we’d be happy to guide you through the key steps involved in selling your nursery. We can also help with planning for your next chapter, whatever that may be. Contact our corporate and commercial solicitors in the New Forest, Hampshire today to discuss your options.

Ben Ironmonger is a Company and Commercial Solicitor and Partner at Scott Bailey in Lymington, Hampshire. Ben is experienced in all aspects of the sale and purchase of SME businesses and commercial contract work.