Buying or selling a business is ultimately a commercial transaction, but the relationship between buyer and seller can have a major influence on how smoothly that transaction progresses.
For a buyer, the seller is often the best source of insight into how the company really operates, where its strengths lie and what challenges may emerge after completion.
For a seller, the buyer is not simply someone making an offer. They are the person or organisation that may take responsibility for employees, customers, suppliers and a business that could have taken decades to build.
Both parties therefore spend much of the sale process assessing one another.
Can the information being provided be trusted? Is the buyer genuinely capable of completing the acquisition? Are the seller's expectations realistic? Will the two sides be able to work together through due diligence, negotiations and the eventual handover?
Whether you are looking to buy a business or preparing to sell a business, understanding this relationship — and what the other side is likely to expect from you — can make the process considerably easier.
It is tempting to view a business sale primarily in terms of numbers.
The seller wants to achieve an acceptable value for the company. The buyer wants to acquire it at a price that reflects its performance, prospects and risks.
In reality, considerably more sits behind those figures.
A buyer may want reassurance that:
The seller will have questions of their own.
They may want to know:
These considerations become particularly important in owner-managed businesses, where the seller may have spent many years building the company and continues to hold important relationships personally.
The result is that a successful business transaction normally requires more than agreeing a price. Each side needs to develop sufficient confidence in the other to continue investing time, money and information in the process.
Neither the buyer nor the seller generally approaches the first conversation without having already formed an impression.
The buyer may have reviewed a business-for-sale listing, teaser or Information Memorandum and considered whether the opportunity fits their acquisition criteria.
The seller or their adviser may meanwhile have assessed the buyer's background, intentions and apparent ability to complete an acquisition.
Confidentiality will also usually influence how much information has been shared.
A seller understandably does not want sensitive financial, customer or operational information circulating among people who have little prospect of buying the company. Buyers, on the other hand, need enough information to decide whether it is worthwhile continuing.
This creates a gradual information-sharing process.
As the buyer demonstrates greater credibility and interest, the seller can normally provide greater access to the business. As more information becomes available, the buyer can make a better-informed assessment of whether to proceed.
Both sides should expect this balance between confidentiality and disclosure to continue throughout the early stages of a sale.
The first direct conversation between a buyer and seller is normally exploratory.
It may take place over Teams, Zoom or another video platform, particularly before either party decides that a face-to-face meeting is worthwhile.
The purpose is not usually to negotiate every element of the transaction.
Instead, both parties are trying to understand whether there is sufficient alignment to continue discussions.
A typical conversation may cover:
The meeting should generally feel like a conversation rather than an interrogation.
Buyers need to gather information, but firing dozens of questions at the owner without establishing any rapport can make the process unnecessarily adversarial.
Similarly, sellers should expect serious buyers to ask detailed questions. Genuine curiosity about the company should not automatically be interpreted as criticism.
For the buyer, the first call is an opportunity to test whether the reality of the business appears consistent with the information already provided.
They may also be considering the seller themselves.
Does the owner seem open and knowledgeable? Are their answers consistent? Do they acknowledge normal commercial challenges, or does every aspect of the company sound suspiciously perfect?
The buyer is also likely to begin assessing how dependent the company is on its owner and how difficult the transition could be.
The seller is qualifying the buyer at the same time.
They may want to understand the buyer's experience, motivation, acquisition criteria, decision-making process and funding position.
This is entirely reasonable.
Selling a business requires considerable management time and often involves disclosing sensitive information. A seller therefore needs confidence that an interested party has a realistic prospect of completing before committing significant resources to them.
There is no single list of questions suitable for every acquisition.
However, some areas deserve particular attention during the early conversations.
This will be one of the most important early questions.
There are many perfectly reasonable reasons for selling a company, including retirement, succession planning, health, family circumstances, releasing capital or simply deciding that a new owner is better placed to take the company through its next stage of growth.
The answer matters because the buyer is trying to establish whether there is another reason beneath the surface.
For example, is competition increasing? Has an important customer indicated that it may leave? Does the company need substantial investment?
Buyers should avoid assuming that an exit automatically signals a problem. Equally, they should investigate explanations that appear vague or inconsistent.
Sellers should be prepared for the question and provide a clear and credible explanation.
No business is without risk.
Competition, recruitment, changing customer behaviour, supplier pressure, regulation, technology and economic conditions can affect even successful companies.
An owner who can explain the company's challenges — and what has been done to address them — can often provide considerably more confidence than one who claims that there are none.
For sellers, openness can be important here. Issues that are hidden at the start and discovered during due diligence may damage trust considerably more than risks that were disclosed early.
The buyer needs to understand where the company depends on particular relationships.
For example:
Concentration does not necessarily make a business unsuitable for acquisition, but it affects risk and therefore potentially value, transaction structure and handover planning.
Owner dependency is particularly important in smaller companies.
A buyer should understand:
For a seller planning an exit, reducing this dependency before going to market can make the company easier to transfer.
Few people understand a company better than the person who has been running it.
Asking the owner where they see future opportunities can therefore reveal useful information about untapped markets, additional services, new locations or operational improvements.
The obvious follow-up question is why those opportunities have not already been pursued.
There may be a perfectly sensible explanation. The seller may lack capital, no longer have the appetite to expand or simply be approaching retirement.
Alternatively, previous attempts may have failed.
Either way, the conversation can help the buyer distinguish between realistic growth opportunities and assumptions that have never been properly tested.
Price matters, but it may not be the seller's only objective.
An owner may also care about:
Understanding these priorities can sometimes reveal ways of structuring a transaction that work for both sides.
A buyer who immediately assumes that every seller is interested only in achieving the highest possible headline price may overlook this.
The questioning should not flow in only one direction.
Sellers should use the early stages of the process to determine whether an interested party is a credible buyer.
The answer can tell the seller considerably more than a simple expression of interest.
A trade buyer may see opportunities to combine operations or enter a new market.
An individual buyer may want to become a business owner without starting a company from scratch.
An investor may see growth potential.
Understanding the rationale behind the acquisition can help the seller assess how serious the buyer is and what they may value most highly.
The seller may reasonably want to understand the buyer's experience.
That does not mean a buyer must necessarily have operated an identical business before. However, they should be able to explain why their skills, experience or resources make the acquisition realistic.
This can be especially important where the seller cares deeply about continuity after completion.
An offer has limited value if the buyer cannot finance it.
Depending on the transaction, funding may come from:
The seller or their adviser may ask for evidence of funds or details of funding discussions before sharing further information or granting exclusivity.
Buyers should not be surprised by this. The seller is trying to distinguish serious purchasers from speculative enquiries.
The seller should understand the buyer's decision-making process.
An individual purchaser may be able to decide quickly.
A corporate buyer may require approval from a board, investment committee, lender or shareholders.
Establishing this early helps both sides develop a more realistic transaction timetable.
The answer may not affect a seller who intends to leave immediately and is primarily concerned with financial terms.
For others, it could be extremely important.
An owner who has spent decades building a company may care about its employees, customers, reputation and future direction.
There may ultimately be limits to the control a former owner can exercise after selling. Nevertheless, discussing the buyer's intentions early can help establish whether the parties are broadly aligned.
If the initial discussions are positive, the next stage may involve meeting at the seller's premises.
This can be one of the most revealing parts of the early acquisition process.
Accounts and marketing documents explain what the company does. Visiting it can show the buyer how it actually feels and operates.
The buyer may observe:
A site visit can also make the transaction feel considerably more real for both parties.
The seller is meeting the person who may eventually own their company. The buyer is seeing the people, assets and operations that sit behind the figures.
A buyer examining machinery, stock, premises or operations should not automatically be viewed as looking for reasons to criticise the business.
They are considering what investment may be required after completion.
Equipment that will need replacing, a lease that will soon expire or a warehouse operating at full capacity can all influence the buyer's assessment of future cash requirements.
At the same time, buyers should remember that the transaction may still be highly confidential.
Employees may not know that the business is for sale.
Questions should therefore be handled sensitively, and buyers should not approach employees, customers or suppliers without permission.
Confidentiality is not simply a legal formality. Mishandling information can damage the company the buyer is hoping to acquire.
Valuation can be one of the more sensitive aspects of the buyer-seller relationship.
The seller may have a clear expectation of what the company is worth. The buyer will want to reach their own conclusion based on earnings, assets, risk, future prospects and comparable transactions.
These figures will not always agree.
During a very early introductory meeting, detailed price negotiations may be premature, particularly where advisers are managing the transaction.
However, buyers should eventually understand how the seller's expectations have been reached.
Factors commonly considered include:
Both sides benefit from treating valuation as a commercial assessment rather than a personal judgement.
A buyer challenging a valuation is not necessarily insulting the company the seller has built. Equally, a seller asking for a premium is not necessarily being unreasonable if the business has qualities that make it particularly attractive to that buyer.
The task is to determine whether there is sufficient overlap between the parties' expectations for a transaction to be possible.
A good relationship between buyer and seller does not remove the need for due diligence.
Nor should it.
Before completing an acquisition, the buyer will normally investigate the company's financial, legal, tax, commercial and operational position in detail.
The seller should expect questions.
The buyer should expect to verify information independently.
This does not have to create an adversarial relationship.
Good due diligence is about understanding the business being acquired, rather than attempting to catch the seller out.
For the buyer, that means approaching questions objectively and focusing on issues that genuinely affect value, risk or the transaction.
For the seller, it means providing organised and consistent information, responding to reasonable questions and explaining problems rather than hoping they will not be discovered.
Problems themselves do not necessarily end transactions.
What can cause considerably greater difficulty is discovering that important information has been withheld.
Once trust is damaged, a buyer may begin questioning other information previously provided, which can lead to further investigation, price renegotiation or withdrawal.
Even transactions where buyer and seller get on extremely well will have points of disagreement.
Typical areas include:
Professional advisers become particularly important at this stage.
They can help each party distinguish between normal transaction negotiation and matters significant enough to threaten the deal.
The buyer and seller do not need to agree on everything immediately.
What matters is whether disagreements can be dealt with commercially and whether both sides remain committed to finding a workable solution.
Buyers will often want protection against the seller immediately establishing a competing business, approaching former customers or recruiting important employees after completion.
Restrictive covenants may therefore form part of the sale agreement.
From the buyer's perspective, this helps protect the goodwill they are acquiring.
From the seller's perspective, the restrictions must be considered carefully because they could affect what they are allowed to do professionally after the sale.
The precise scope, duration and enforceability of restrictive covenants is a legal matter and should be considered with appropriate professional advice.
It is nevertheless helpful to discuss the seller's future plans early enough that major differences do not emerge shortly before completion.
For many acquisitions, the relationship does not end when the sale completes.
The existing owner may remain for a defined handover period.
This can be particularly valuable where:
The arrangement should not be left vague.
Buyer and seller should agree:
This last point matters.
A former owner who has spent decades making every decision may find it difficult to step back. A new buyer may equally struggle if the seller continues behaving as though the company belongs to them.
A successful handover requires clarity about when control has transferred.
Several behaviours can make an acquisition considerably harder than it needs to be.
Most experienced buyers do not expect to find a perfect business.
They do expect important information to be disclosed.
A known issue explained early can often be assessed and reflected in the deal. The same issue discovered unexpectedly during due diligence can create a much larger problem because it raises questions about trust.
Due diligence may justify changes to commercial terms.
However, a buyer who repeatedly attempts to reduce the price without a clear reason can quickly lose credibility.
The same applies to a seller who continually introduces new conditions after the principal terms have been agreed.
Business acquisitions involve many moving parts.
Long delays in responding to reasonable questions can cause frustration and make the other party question commitment to the transaction.
Where information will take time to produce, saying so is generally better than leaving the other side without an explanation.
Buyers can become attached to a particular acquisition before completing due diligence.
Sellers can understandably feel personally attached to a valuation or to the way the company has historically been operated.
Both sides benefit from remembering that the transaction must ultimately make commercial sense.
Where advisers are managing communications, attempting to bypass them on sensitive matters can cause unnecessary problems.
Direct contact between buyer and seller can be extremely useful for building rapport and understanding the company, but financial, tax and legal matters should be handled through the appropriate advisers where necessary.
A productive relationship does not mean the parties never disagree.
Instead, there are usually several positive indicators.
Both sides:
Importantly, neither side needs to trust the other blindly.
Documents should still be checked. Funding should still be verified. Due diligence should still be completed. Appropriate protections should still be included in the legal agreements.
Commercial trust and proper verification can exist together.
The nature of the buyer-seller relationship will normally change considerably between the first enquiry and completion.
At the start, both sides know relatively little about one another.
The buyer is assessing the opportunity. The seller is assessing the buyer.
As discussions progress, more detailed information is exchanged and the commercial terms become clearer.
Once Heads of Terms are agreed, attention turns increasingly towards due diligence, financing, legal documentation and resolving specific transaction issues.
Finally, the emphasis shifts towards completion and transition.
What begins as two parties deciding whether they want to do business together may end with them working closely to transfer employees, customers, suppliers, systems and years of accumulated knowledge.
For that reason, the quality of the relationship can have practical commercial consequences.
If you are considering buying a business:
If you are preparing to sell your business:
Buyers and sellers enter a transaction from different positions.
The buyer is trying to understand what they are taking on and ensure that the acquisition represents an acceptable return for the risks involved.
The seller is trying to achieve appropriate value and terms while protecting the business, its confidential information and, in many cases, the people and legacy connected to it.
Those interests will sometimes conflict.
However, both parties ultimately have one important objective in common: if the deal is right, they want it to complete successfully.
The most productive buyer-seller relationships recognise that.
Good preparation, realistic expectations, appropriate professional advice and open communication can help both sides move from the first conversation through to due diligence, completion and a successful handover with considerably greater confidence.
Whether you are considering buying, selling or planning the next stage of your business journey, having experienced support around you can make the process clearer and more manageable.
Valius works with business owners and management teams to understand their objectives, assess their options and navigate important strategic and financial decisions. If you would like to discuss your plans and explore the support available, contact the Valius team for an initial conversation.