From First Letter to Completion: How Buying a UK Business Works

Most descriptions of buying a business come from people selling something next to it: a course, a brokerage, a legal service. They tend to make the process sound either terrifyingly complex or suspiciously easy. In practice it's a sequence of ordinary steps, most of them conversations, spread over more months than you'd like.

This is how that sequence runs for a typical owner-managed UK business, the £500k–£5m turnover companies most first-time buyers look at. Where a stage has its own guide, I've linked to it.

One note before we start: this is general information from a data company, not legal, tax or financial advice. I've marked the stages where you need professionals, and skimping on them is the most expensive saving available in this process.

Stage 1: Decide what you're buying and why

The off-market sourcing guide covers this in detail, so briefly: a sector you understand, a geography you can reach, a size you can finance and run. Add one more question people skip: what happens on day one? You might run the business full-time yourself, keep the seller on for a handover year, or install a manager. Each answer suits a different kind of target, and knowing yours changes which businesses are worth a look.

Stage 2: Build a pipeline, not a crush

You won't buy the first business you like. Deals fall through often, and for reasons you can't see from outside: the owner's daughter decides she wants it after all, the owner wants a number nobody will pay, the accounts reveal a customer worth 60% of revenue. Buyers who work a pipeline of qualified targets (found on the register, scored on succession signals, approached in steady weekly batches) get to walk away from bad deals. Buyers with one target get to convince themselves a bad deal is fine.

Stage 3: First contact and the early conversations

The letter goes out. A small percentage reply. You talk. The early conversations have one purpose that's easy to forget: the owner is deciding whether to trust you, and your valuation model doesn't come into it yet. A retiring owner is choosing who inherits their life's work, their staff and their name over the door. Plenty of sellers weigh the buyer as much as the price.

A few practical points: meet in person, at their premises if they're comfortable. Ask about the business's history before its numbers. Don't lead with price, structure or anything that sounds like a term sheet. Aim to leave the first meeting with a second one booked, nothing more.

Somewhere in these early meetings, you and the seller will want to sign a confidentiality agreement (an NDA). It lets the owner share real numbers without worrying, and it shows you're serious.

Stage 4: Understanding the business (informal diligence)

Before any offer, you need the basics: three years of accounts (you'll have seen the filed versions on the register before the first letter), management accounts if they exist, customer concentration, who does what, and the real reason the owner is selling. The last two matter most. Owner-dependence is the central risk in any owner-managed acquisition: if the customers are loyal to Dave and Dave is leaving, what are you buying? Sometimes the answer is "less than the accounts suggest", and sometimes it's "a solid team Dave hasn't let run in years". You need to know which.

Stage 5: Offer and heads of terms

Once both sides are serious, you put the outline in writing: the price (or how you'll arrive at it), what's included, how payment is spread over time, what happens to the owner (a handover period, a consultancy), and exclusivity, a window in which they negotiate only with you. This document, the heads of terms, is mostly not legally binding (the exclusivity and confidentiality clauses usually are), but everything after it hangs off it. Leave it vague and you'll pay for it later in legal fees.

On structure: few small-business deals are all cash on day one. Spreading the price through deferred payments or earn-outs tied to performance is normal practice. The funding and structure guide covers how it works and where it goes wrong.

Stage 6: Due diligence (formal, and where you need professionals)

Now the paid professionals arrive, and this isn't the place to economise. An accountant experienced in transactions tests the financial picture: whether the profits are real, whether the cash flow matches, whether liabilities are lurking. A solicitor handles legal diligence: contracts, employment, property leases, litigation.

On employment, the structure of the deal matters. Buy the trade and assets and the staff move across to you on their existing terms under TUPE (the Transfer of Undertakings regulations). Buy the shares and TUPE usually doesn't apply, because the company stays their employer (Brodies LLP). Either way, the staff and their contracts come with the business, so the employment review isn't optional.

Expect diligence to surface something. It usually does. The useful question is whether what you found changes the price, the structure or the decision. Small issues become price adjustments. Medium issues become warranties and retentions. Some findings send you home: accounts that don't reconcile, a lease with two years left on premises the business can't leave, that 60% customer. Walking away late still beats completing on the wrong deal.

Stage 7: Legals and completion

The lawyers turn the agreed deal into a purchase agreement. One structural decision shapes the whole document: a share purchase (you buy the company itself, history and all) or an asset purchase (you buy the trade and assets out of it, and the company, with much of its history, stays behind). Sellers usually prefer shares. Buyers often prefer assets. Tax treatment differs sharply for both sides, so your accountant and solicitor need to be involved before the structure is fixed.

The agreement carries the protections diligence earned you: warranties (the seller's formal statements about the business, with a claim if they prove untrue), indemnities for specific identified risks, and often a restrictive covenant to stop the seller setting up next door with the customer list. Then come signatures, funds moving, and the seller handing you the keys.

Stage 8: The handover (the stage that decides whether it worked)

Completion is the middle of the story. The first months decide the ending: staff meet you and decide whether to stay, key customers meet you and decide the same, and the seller honours a handover period, or doesn't, while relationships and unwritten knowledge pass to you. Almost everything about the first hundred days goes better if you negotiated it before completion: the seller's availability, the introductions, what gets announced and when.

How long does all this take?

Months. Getting from a first letter to a first serious conversation can take months on its own: succession-age owners move at their own pace, and the best replies to a letter campaign often arrive long after you sent it. From agreed heads of terms to completion, a straightforward small deal commonly takes three to six months, and complications stretch it. If an owner has a tax date in mind, such as the 6 April 2027 change to Business Asset Disposal Relief, that calendar fills up fast. Anyone promising you a completed acquisition in weeks is describing a deal you shouldn't be part of.

The corollary: start the sourcing work now, before you feel ready. The pipeline runs on calendar time, and the letters you send this month are what get you into rooms next spring.

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