If you may sell in the next few years, start by separating three questions:
- What outcome do you want? Consider timing, price, certainty, employees, brand, customers, retained ownership, and any role after settlement.
- Can the business operate without you? A buyer needs to understand what transfers with the business and what still depends on the owner.
- Can you evidence what you say? Financial performance, contracts, licences, assets, compliance, and customer retention need records, not only explanations.
Business.govt.nz recommends setting succession goals, identifying assets and liabilities, establishing a timeframe, obtaining advice, documenting the plan, and reviewing it regularly. It also notes that putting a sound plan in place can take years. There is no universal preparation period, but earlier preparation gives you more options.
1. Define the outcome before discussing price
A sale can involve a full exit, a retained shareholding, a consulting or director role, a staged handover, or another succession arrangement. Write down your priorities before speaking with buyers so that headline price does not displace the outcomes that matter to you.
- When do you want to reduce your role or leave?
- Do you want a complete exit or continuing involvement?
- What should happen to the company name, locations, and customer relationships?
- What commitments matter regarding employees and management?
- How much transaction uncertainty can you tolerate?
- Would deferred consideration, an earn-out, vendor finance, or rollover equity be acceptable?
For a comparison of succession routes, read business succession options in New Zealand. To compare acquisition models, read private equity, trade sale, and permanent ownership.
2. Assemble reliable financial information
Buyers and their advisers will test how reported profit connects to bank records, tax filings, payroll, working capital, assets, debt, and the current trading position. Prepare information that is consistent, traceable, and clearly explained.
Financial preparation checklist
- annual financial statements and current management accounts
- income-tax, GST, and payroll records that reconcile to the accounts
- aged receivables and payables
- inventory records, ageing, and write-down policies where relevant
- asset register, ownership, finance arrangements, and maintenance history
- debt, guarantees, security interests, leases, and contingent obligations
- working-capital seasonality and normal operating requirements
- clear support for any owner-related, one-off, or non-operating adjustments
Do not present an earnings adjustment as automatic. A buyer may accept, reject, or modify it after testing whether the cost is genuinely non-recurring and what replacement management will cost.
For the distinction between normalised earnings, enterprise value, equity value, and seller proceeds, read how business valuation works in New Zealand. To see how preparation fits into a transaction, review the NZ business sale process and use the seller due-diligence checklist.
3. Reduce avoidable owner dependence
Owner dependence is not solved by writing a job description shortly before a sale. A buyer will look for evidence that customer relationships, approvals, quoting, technical knowledge, staff leadership, and daily decisions are distributed across a functioning organisation.
- document key operating and approval processes
- give managers genuine authority and measurable responsibilities
- introduce senior staff into major customer and supplier relationships
- record critical technical knowledge and recurring workflows
- map licences, certifications, delegations, and key-person dependencies
- test whether normal operations continue during an extended owner absence
4. Review contracts and change-of-control terms
List every agreement that matters to revenue, supply, premises, people, intellectual property, finance, and regulatory operation. The transaction structure may affect whether an agreement remains in place, requires consent, can be assigned, or can be terminated.
- customer and maintenance contracts
- supplier, distribution, agency, and exclusivity agreements
- property and equipment leases
- finance documents, guarantees, and security arrangements
- employment and contractor agreements
- software, data, intellectual-property, and brand licences
- regulatory approvals, registrations, permits, and professional licences
Record the legal entity, term, renewal and termination rights, assignment provisions, change-of-control provisions, required notices, and consent process for each material agreement. Obtain legal advice before approaching a counterparty for consent because timing and confidentiality matter.
5. Understand asset-sale and share-sale differences
Inland Revenue states that asset and share sales have different consequences for buyers and sellers and are treated differently for tax. In an asset sale, the parties need to identify what is being sold and agree how the price is allocated between asset classes. That allocation usually affects the tax position of both sides.
A share sale transfers shares in the company that owns the business. The company, its contracts, assets, liabilities, and employees generally remain in the same legal entity, subject to specific agreement terms and legal issues. The apparent simplicity of a share transfer does not remove the need for financial, legal, tax, and regulatory diligence.
Do not choose a structure from a generic tax summary. Ask your lawyer and tax adviser to model the consequences before commercial terms harden.
For a structure-specific comparison, read asset sale versus share sale in New Zealand.
6. Prepare for employee implications
Employment New Zealand explains that an asset sale can create technical redundancy where employment with the seller ends and employees are offered employment by the buyer. A share sale generally does not change the employing entity. Employment agreements must contain employee-protection provisions for relevant restructuring situations, and specified employees can have additional statutory protections. The NZ employee implications guide explains the main seller-side questions.
Prepare accurate employment information, but control access to personal information and follow privacy, consultation, and legal requirements. Your preparation should include:
- current employment agreements and employee-protection provisions
- roles, remuneration, hours, leave balances, and service dates
- contractor arrangements and classification
- collective agreements, disputes, claims, and consultation obligations
- work visas and right-to-work records where applicable
- health and safety systems, incidents, investigations, and training
- key-person retention risks and lawful transition options
7. Build a controlled due-diligence file
Prepare a structured information set before a process starts, but do not release sensitive material indiscriminately. Use staged disclosure, confidentiality agreements, access controls, and professional advice.
| Area | Examples of evidence |
|---|---|
| Corporate | ownership, constitution, governance records, related entities |
| Financial | accounts, tax records, working capital, debt, asset register |
| Commercial | material contracts, pipeline, concentration, retention, pricing |
| People | employment documents, organisation chart, leave, claims, key roles |
| Operations | processes, systems, suppliers, capacity, quality, maintenance |
| Legal and regulatory | licences, permits, disputes, insurance, privacy, health and safety |
| Property and technology | leases, titles, software rights, cybersecurity, intellectual property |
8. Test the buyer, not only the offer
An offer should be assessed as a package. Compare funding certainty, conditions, required approvals, diligence scope, payment timing, deferred consideration, security, governance, transition expectations, employee plans, brand intentions, and the buyer's record after previous acquisitions.
Questions to ask a buyer
- Who will own the business, and how is the acquisition funded?
- What conditions must be satisfied before settlement?
- What happens to the brand, locations, management, and employees?
- What involvement is expected from the seller after settlement?
- Which parts of the price are fixed, deferred, contingent, or financed by the seller?
- What is the buyer's expected ownership period and eventual exit assumption?
- Can the buyer provide references from previous sellers and current managers?
9. Avoid common preparation mistakes
- Starting with a target multiple: value depends on maintainable earnings, risk, assets, liabilities, working capital, structure, and negotiated terms.
- Waiting for a buyer to organise the records: unresolved inconsistencies reduce confidence and consume negotiation time.
- Hiding a known issue: unexpected findings can damage credibility and alter the process. Get advice on disclosure.
- Contacting customers or suppliers too early: consents may be required, but confidentiality and sequencing need a plan.
- Ignoring employee obligations: transaction structure can materially change the required process.
- Choosing the highest headline price: conditions, deferrals, risk allocation, and buyer conduct can matter as much as the headline.