A few things you should consider due to Covid-19
Corporate transactions have understandably been affected by Covid-19 but it is not just current transactions that will be affected by the current economic uncertainty; future transactions and those that have already completed should also be considered.
For anyone currently negotiating a sale or purchase of a business, Covid-19 will no doubt come up in your discussions as the buyer will want to know how this had affected your business.
If the business of the selling party has been negatively affected by Coivd-19 in any way, the buyer may look to negotiate a reduction in price. If this is the case, this should be discussed with both your accountant and legal advisers before any formal agreement is made.
As most of us have never experienced anything like this before in our lifetimes, it is unknown how long the economic effects of this pandemic will last.
As a seller, expect buyers to undertake extra due diligence in order to ensure they have considered all aspects of the business in more detail, especially those which may have been affected by Covid-19.
Buyers will also want to ensure you have complied with your obligations in relation to the furloughing of any employees, so all documentation/correspondence in relation to furloughed staff should be kept.
It is not just current and future business sales that should be considered. If a past transaction included a mechanism for payment of all/part of the purchase price to be made after completion, the terms of this payment should be considered in order to understand how this may affect any future payments being made.
If the payment is dependant on the performance of the business and the business has been underperforming due to the economic strain of Covid-19, this may affect the buyer’s ability to make future payments and may affect the seller’s ability to hit any expected targets. If this is the case, it may be that both parties can negotiate an alternative payment arrangement.
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Corporate & Commercial Solicitor