GB
Whether you’re actively preparing for a company sale or simply laying the groundwork, getting your legal house in order has never been more important.
In 2024, UK private equity investors continued to face challenges - exit volumes fell for the third year running, and deal values dropped 20% to £46.1 billion (KPMG). With deals taking longer to close and buyers becoming more selective, being legally exit-ready is now a competitive edge in today’s M&A market.
If you’ve raised capital before, you’ll know the drill: a clean data room, filings up to date, and a tidy cap table. But unlike a funding round, an exit due diligence process puts every inch of your business under the microscope. Now’s the time to double-check that all assignments are watertight, licences are in order, and open-source use is compliant. Don’t assume it’s all fine just because it passed muster at Series A.
Here are the key legal FAQs every business should be ready to answer as they prepare for an M&A exit.
Exit due diligence is thorough, and anything hidden will likely surface - from historic disputes and regulatory issues to GDPR breaches or tax complications. In tech, it’s been cited that around 60% of M&A deals fail during due diligence (Beyond & McKinsey).
But it’s not just the risk they’re put off by, it’s surprises. Being transparent allows you to control the narrative and maintain trust, both essential to keeping momentum and valuation intact. Thorough legal due diligence not only avoids red flags but also strengthens buyer confidence.
With intangible assets now making up around 90% of the S&P 500’s total market value (Ocean Tomo), clear IP ownership is often the cornerstone of company value during an M&A transaction.
That means making sure you actually own what you say you do, and being able to demonstrate that your intellectual property is fully protected, particularly if you’ve worked with freelancers, overseas teams, or legacy founders. A forgotten NDA or vague contract clause can quickly become a value-chipping point. IP that can be registered should be, and your legal team should confirm that all IP assignments and licences are watertight before a sale.
Equity incentives can motivate teams… and complicate exits. You'll need a clear picture of who holds what, how vesting works, and what happens on a sale. Poor documentation or unexpected tax liabilities can create issues for both your deal and your team.
Involve your legal and finance teams early to ensure employee share schemes and stock option plans are in good shape. And don’t forget the people side, managing expectations and communicating clearly will go a long way in protecting morale during the transition.
Exits often involve complex tax implications, both for the business and for individual shareholders. While every deal is different, there are a few key areas to keep in mind from the outset.
One major consideration is the structure of the deal: whether it’s a share sale (where the buyer acquires the company itself) or an asset sale (where they buy specific assets like IP or contracts). These structures carry different tax consequences and should be part of your early business exit planning.
Share sales are often more tax-efficient for sellers, but buyers may prefer asset deals if they want to avoid taking on liabilities.
You’ll also want to understand whether shareholders qualify for Business Asset Disposal Relief (formerly Entrepreneurs’ Relief), how employee equity will be taxed, and what happens if some of the consideration is rolled over into a new entity. As a general rule, tax leads and legals follow - a critical principle in exit readiness.
Yes, because deal structure directly affects how much you actually receive, and when. Earn-outs, deferred payments and indemnities can all reduce your headline number or delay access to cash.
The terms that follow the valuation, the risk allocation, conditions, and timelines are where M&A deals are won or lost. This is where your lawyers can protect your downside, push for clarity, and help you walk away with maximum value.
A share sale means the buyer acquires the entire company - contracts, liabilities and all. It’s usually cleaner for the seller.
An asset sale means only specific parts of the business are bought, which often requires more contract renegotiation, new employee arrangements, and added complexity.
Knowing which route a buyer might take (and preparing accordingly) makes for a smoother exit process and avoids being caught off guard during negotiations.
The short answer is yes. We’d always recommend paying special attention to change-of-control clauses (which might require you to get customer or partner consent), termination rights (which might be triggered by a sale), and assignment provisions (which affect whether contracts can be transferred).
One overlooked clause in a key supplier agreement can hold up a deal for weeks or risk losing a critical relationship at the worst possible time.
Having your commercial contracts reviewed in advance puts you on the front foot and helps keep the M&A due diligence process moving smoothly.
Exits aren’t just financial, they’re emotional. For many leadership teams, protecting company culture and values matters just as much as price.
While not every buyer will accommodate this, it’s worth exploring ways to embed continuity: through transition plans, retention bonuses, or agreed principles in the deal documents. If culture is a priority, make that part of the conversation from the start and bake it into the M&A structure where you can.
Earlier than you think.
An experienced M&A legal team can help you identify and fix risks before buyers do, streamline your documentation, avoid common pitfalls, and act as a sounding board for deal terms.
Good lawyers are an investment that should pay themselves off many times over, particularly when it comes to protecting value during exit negotiations.
Thinking about your next move?
Whether you’re six months or two years away from a business exit, our team at Founders Law helps fast-growing companies get legally exit-ready - protecting your value, your people, and your legacy.
