London rewards buyers and sellers who understand structure. A smart deal can bridge valuation gaps, unlock financing that seems out of reach, and protect both sides when the future is uncertain. A blunt deal, even at a fair price, can trap owners in endless earn-out disputes or saddle buyers with liabilities they never intended to carry. After years of advising founders and acquirers across the capital’s service businesses, light manufacturing, specialty retail, and technology-enabled firms, I have come to see structure as the quiet lever that decides whether a sale becomes a win or a court case.
Liquid Sunset Business Brokers works in this middle ground, on and off market, and across size ranges from a small business for sale London to multi-million-pound companies for sale London-wide. The same frameworks apply whether you want to buy a business in London or sell a business with minimal drama. What changes is how you weight tax, cash flow, and risk. Let’s walk through the main structures, the real trade-offs, and how we navigate them in practice.
Why structure outruns price
Most owners start with headline price. The market doesn’t care about your round number; it cares about net proceeds, certainty of close, time to cash, and how much risk you carry after handover. Buyers focus on total economic outlay, downside protection, integration flexibility, and how lenders will underwrite the deal. When we broker a business for sale in London, roughly a third of the negotiating time goes to price and two thirds to structure, representations and warranties, and post-completion mechanics. That ratio https://charliertwg938.lowescouponn.com/buying-a-business-in-london-common-mistakes-and-how-to-avoid-them rises when the business depends on the owner’s relationships, when working capital is volatile, or when there are regulatory hooks such as FCA permissions, landlord consents, or data obligations.
A quick example: a marketing agency turning £3.2 million in revenue and £550,000 in EBITDA received two offers. One was £3 million all cash on completion with a broad working capital target and a 12-month warranty cap. The other was £3.4 million split as £2.4 million on completion, £400,000 deferred, and a £600,000 earn-out tied to client retention. On paper, the second looked higher. After we adjusted for working capital mechanics, integration risks, and the seller’s desire to move to Portugal within 60 days, the first offer delivered higher expected and faster cash to the seller, with fewer post-sale obligations. Structure, not sticker price, carried the day.
Asset sale or share sale: the first fork
In the UK, whether a transaction is a business and asset sale or a share sale will dominate tax treatment, liability allocation, and practical completion steps.
In a share sale, the buyer acquires the company’s shares and steps into the corporate shell along with every contract, permission, debt, and skeleton. For many UK sellers, capital gains treatment on a share sale is attractive, and reliefs may apply subject to eligibility and current thresholds. Buyers sometimes prefer share purchases for continuity, especially when key contracts are difficult to novate or when licences and supplier terms would be hard to transfer. But the buyer then eats historic risks, which calls for tighter warranties and indemnities, more thorough due diligence, and often warranty and indemnity insurance for larger transactions.
In an asset sale, the buyer picks specific assets and often leaves behind historical liabilities. This can simplify risk, but it complicates operations. Every contract needs assignment or novation, employee transfers may occur under TUPE, and getting landlords and key clients to consent can take weeks or months. For micro and small businesses where the owner is deeply embedded in customer relationships, an asset sale can be a clean route for the buyer but a choppy path for the seller unless the consent map is carefully plotted in advance.
Borderline cases appear constantly. A boutique e-commerce brand where contracts are all vendor agreements and the customer base is effectively a database is often well suited to an asset sale. A regulated financial services firm or a company with sophisticated software licences tied to the legal entity will lean toward a share sale. At Liquid Sunset Business Brokers, we map contracts and permissions early, so we can tell a buyer who wants an asset deal whether that is workable without losing revenue on day one.
Cash on completion, deferred payments, and the art of bridging gaps
Few deals close at a single cash payment. Most mix cash on completion, deferred consideration, and sometimes an earn-out. Each lever moves risk.
Cash on completion is simple. It lowers the risk for the seller and typically comes from a combination of buyer equity and senior debt. But when valuation expectations stretch the debt service coverage ratio, something has to give. Deferred consideration spreads payments over time, typically 6 to 36 months, sometimes with interest. It is not an earn-out; it is payable regardless of post-completion performance, subject to any default protections. Deferred structures bridge gaps when lender leverage caps limit cash at close.
Earn-outs tie a portion of the price to future metrics: revenue, gross profit, EBITDA, or client retention. They are common in sectors where the owner’s relationships or know-how are key, from B2B agencies to specialized maintenance firms. They are also the most litigated component when poorly drafted. If you are buying a business in London and plan to integrate it into a larger group, think carefully about how overhead allocations, cross-selling, or pricing changes will affect measured performance. If you are selling, push for simple metrics and clear control boundaries.
An anecdote: we advised on a sale of a managed IT services provider in West London with £1.8 million in recurring revenue. The buyer proposed a three-year earn-out tied to EBITDA. We had seen EBITDA-based earn-outs collapse under disputes about software subscriptions, central overhead, and staff retention incentives. We negotiated a two-year revenue-based earn-out limited to specific legacy contracts, with a client-by-client retention table and explicit treatment of price increases. The difference was months of harmony instead of arguments about whether incentives were overhead or cost of sales.
Working capital: the quiet swing factor
If you remember one line, remember this: working capital adjustments shift more money after completion than almost any other clause. In the UK, most share deals set a target level of normalised working capital, with a true-up at completion based on a defined calculation. The devil hides in definitions and seasonality. In many London businesses, especially those with project cycles or VAT swings, working capital at any arbitrary month-end can be misleading.
We insist on a 12 to 24 month look-back to define normalised levels and to adjust for one-offs like a large prepaid insurance cost or a customer paying late due to holiday closures. We also carve out items that are, economically, debt. Deferred VAT, arrears in PAYE, or overdue supplier balances should not masquerade as working capital. A café group we sold in South London would have lost £220,000 of value under a shallow calculation that ignored a seasonal stock build and the fact that VAT had spiked due to a prior quarter’s promotional campaign. We fixed it with a schedule that anchored the target to averaged weeks-on-hand and customer payment patterns.
Seller financing and security
In smaller transactions, and sometimes in off market business for sale situations where conventional lenders move slowly, seller financing fills the gap. The seller extends a loan to the buyer for part of the price. This reduces upfront cash and brings alignment. It also creates risk for the seller if the business stumbles.
If we arrange seller financing, we document it like a real loan. Interest, amortisation, covenants, and security matter. A debenture over company assets and a personal guarantee from the buyer are common. We also limit leakage: the company should not pay dividends or extraordinary bonuses until the seller note is serviced. For the buyer, negotiate cure periods and ensure covenants are realistic for your cash flow. In London’s service-heavy SMEs, a modest seller note with a stepped interest rate can separate a stalled deal from a signed one.
Earn-outs that work in practice
Earn-outs can become weapons or glue. Their success turns on four design choices: metric selection, control and continuity, integration rules, and dispute mechanisms.
Revenue metrics are simple to track but ignore margin. EBITDA captures value creation but invites accounting debates. Gross profit is a workable middle ground in agencies and distribution, where pass-through costs would otherwise distort the picture. Control matters too. If the buyer can dismiss key staff, cut marketing, or change pricing unilaterally, the seller’s ability to hit targets is compromised. In that case, either ring-fence a business unit with a shadow P&L or change the metric to client retention rather than profit.
Integration rules should be spelt out. If the buyer plans to move the business into a group, will shared services fees be charged? On what basis? Will cross-selling revenue count? We once used a rule that counted credited cross-sell revenue at 50 percent toward the earn-out metric, with a schedule of included products, to avoid disputes in a digital services roll-up.
Finally, include a clear dispute resolution path. A tie-breaker accountant clause costs little and avoids litigation. Earn-outs are chemistry tests. They work when the buyer truly wants the seller engaged and when both sides agree up front how the test is marked.
SPA mechanics: warranties, indemnities, and baskets
Price fades quickly if warranties and indemnities are poorly drafted or misunderstood. In a typical London share sale, sellers provide a suite of warranties about accounts, tax, employees, litigation, compliance, and customers. There are caps, baskets, and time limits. Buyers seek specific indemnities for known issues, such as a lingering employment claim or an unresolved VAT position.
A few principles have saved clients pain. Keep the general warranty cap anchored to a percentage of price, often 20 to 50 percent depending on size and risk. Set a de minimis claim threshold and an aggregate basket so trivial items don’t trigger claims. If the buyer demands a fundamental warranties cap at 100 percent, negotiate a shorter survival period on general warranties. For known problems, agree a ring-fenced indemnity with a defined lifespan and process. Warranty and indemnity insurance has become more accessible for mid-market deals, though cost and underwriting diligence can stretch timelines. We use it selectively where a clean exit is vital and the financial profile justifies the premium.
Regulatory and landlord consents: the London twist
The capital introduces wrinkles. Leases on high-street units can hinge on landlord consent, which drags if the landlord is institutional or if there is a rent review on the horizon. Licences for alcohol, late-night trading, or street seating can complicate completion dates. In regulated professions, the FCA, SRA, and other regulators may require prior approval for controller changes. For tech firms handling sensitive data, client consent under data processing agreements can be the gating item.
We map consents upfront and set a long-stop date that reflects reality. A share sale can sometimes bypass the need for novation, but it does not avoid change-of-control consents embedded in contracts. We include a condition precedent list in the heads of terms so both sides budget time and plan bridging finance accordingly. It is better to be frank early than to miss a seasonal sales peak because a landlord took eight weeks to answer an email.
Valuation mechanics that survive diligence
Valuation is more art than science at the smaller end, but the mechanics should survive diligence. For profitable SMEs, multiples of normalised EBITDA remain the default. We strip out non-recurring costs, owner remuneration above market, and headcount gaps. For micro-businesses and owner-operator firms, a multiple of seller discretionary earnings may fit better. Recurring revenue businesses can command premiums if churn is low and contracts are robust. Project-heavy businesses with lumpiness will attract higher earn-out components.
If you are buying a business London that looks inexpensive relative to peers, ask what you are inheriting. Is there customer concentration? A pending lease event? Deferred maintenance? For a boutique fit-out contractor we placed, a headline valuation at 3.8 times EBITDA made sense only after we adjusted for a one-off project margin and recognised a working capital load that the bank would not fund. A clean model that connects valuation to structure and lender support is worth more than a generous multiple that collapses in credit committee.
Off-market dynamics and confidentiality
Liquid Sunset Business Brokers often runs off market business for sale mandates when owners want confidentiality. The buyer pool is curated, NDAs precede information sharing, and conversations move directly to fit and structure. This can fast-track trust, but it puts more weight on pre-diligence checks. We validate funding capability early and pressure-test integration plans. For buyers, off-market does not mean discount; it often means access and less competition. The advantage is time to design a structure that works rather than a rushed auction with rigid templates.
Cross-border buyers and UK-specific surprises
London attracts international acquirers. Cross-border deals add layers: currency exposure, tax residency issues, and differences in employment law expectations. UK employment protections catch some foreign buyers off guard. TUPE transfers are not optional. Pension auto-enrolment contributions are legal obligations. Holiday pay accruals matter. These are not mere footnotes; they alter working capital, net debt, and integration cost. We factor them into the heads at the start, not as addenda after fatigue sets in.
When debt becomes the hinge
Debt availability shapes structure more than most people admit. Senior lenders in the UK like predictability: recurring revenue, strong debtor books, and tangible assets. Many London service businesses are light on hard assets, so cash flow lending dominates. Debt service coverage ratios, typically 1.5 to 2.0 times for conservative lenders, set the ceiling for cash at completion. If the business has seasonal cash flow, leverage may be constrained. That is when deferred consideration, seller notes, or minority equity rollovers keep the deal alive.
We maintain a bench of lenders comfortable with businesses for sale London-wide that do not fit asset-based lending. Their appetite shifts with macro conditions. In good credit climates, we see 3.0 to 3.5 times EBITDA senior leverage for stable, recurring revenue businesses. In tighter periods, that drops to 2.0 to 2.5 times, which pushes more creativity onto structure. If your deal relies on yesterday’s leverage levels, redesign now, not after diligence.
Rollovers and management incentives
In some acquisitions, particularly where there is growth ahead, the seller keeps a minority stake by rolling over equity. This aligns incentives and eases transition. It also complicates valuation and governance. Minority protections, drag and tag rights, and exit timelines become real issues. If the buyer is a private equity platform, evaluate the incentive plan. If the rollover is in a holding company rather than the operating company, understand the capital structure and any preferred instruments that sit above you. Not all equity is equal. The rollover can be the best wealth-creation piece for a seller who believes in the next four years, but only if the instruments and information rights are sound.
How we run a thoughtful process
Every sale starts with a simple discipline: no surprises. We pre-diligence financials, contracts, HR, and compliance. We sketch a likely working capital target. We identify consent gates and tax preferences. Then we build the structure map: three viable combinations of cash, deferred, earn-out, and, if useful, seller financing or rollover. This map shapes the teaser and the data room, so buyers respond with tailored proposals rather than generic one-pagers.
For buyers who want to buy a business in London or buy a business London Ontario style in a Canadian context, the choreography is similar, though tax and legal frameworks differ. Liquid Sunset Business Brokers works with partners familiar with business brokers London Ontario and businesses for sale London Ontario for clients exploring both markets. The patterns rhyme: asset versus share sale, working capital normalisation, and the trade between upfront cash and performance-linked consideration. The details, from HST to landlord norms, change. We draw the differences out before term sheets are signed, so expectations stay aligned.
Short buyer checklist for structure choices
- Decide early whether asset or share purchase fits your risk, contract map, and tax profile. Set a financing plan that lenders can underwrite, then shape cash, deferred, and seller notes accordingly. Keep earn-out metrics simple, control boundaries clear, and integration rules in writing. Model working capital thoroughly using multi-period averages and clean definitions. Align SPA protections with known risks, using specific indemnities where needed.
Short seller checklist before you test the market
- Clean your numbers, identify normalised EBITDA or discretionary earnings, and document adjustments. Map contracts, consents, and licences, including any change-of-control clauses. Decide your red lines: minimum cash at completion, acceptable deferred terms, and earn-out appetite. Prepare for diligence on tax, HR, and compliance; small gaps become big discounts late in the process. Clarify your post-completion role, timeframe, and compensation if you will stay through an earn-out.
London sectors and their structural quirks
Professional services firms, especially agencies and consultancies, often benefit from revenue or gross profit earn-outs. Talent retention and client churn matter more than plant and equipment. Structuring retention bonuses that sit outside the earn-out metric avoids arguments about whether people costs were manipulated to depress profit.
Hospitality and retail in London carry landlord and licensing complexity. Asset deals are common, but lease assignment risk dominates. Deferred consideration tied to site-level cash flow can provide comfort when the footprint includes a mix of flagship and marginal units. Capital expenditure obligations in leases can hide in the notes; we flush them out early.
Light manufacturing and distribution mix asset and share deals. Working capital can be large relative to EBITDA. Revolving facilities need coordination at completion, and inventory valuation policies should be locked down in the SPA. We have seen deals wobble because a buyer assumed FIFO while the seller used weighted average, creating a £60,000 swing that no one had priced.
Technology-enabled SMEs bring subscription metrics and data considerations. Where ARR and net revenue retention are solid, buyers often accept higher multiples and lower earn-out weighting. Data protection warranties and cyber posture become central. Even a small breach history can lead to specific indemnities and escrow retentions.
Off-market nuance with Liquid Sunset
Owners sometimes ask for a quiet sale to avoid unsettling staff or customers. We run a shaped process under NDA, reaching out to a small field of qualified buyers. For buyers scanning companies for sale London, these off-market opportunities demand swift, credible engagement. You may see lower competition, but the bar for seriousness is higher. Proof of funds, a clear plan for transition, and a proportionate structure win access. We vet chemistry as much as capital; it matters during earn-outs and handovers.
Practical negotiating notes that save deals
Small phrasing choices avert big fights. Define “material adverse change” in measurable terms. Specify whether management accounts or audited accounts drive the working capital true-up. Clarify whether late-paying legacy customers count toward earn-out revenue if cash is received post-period. Tie deferred consideration to non-performance conditions only if clearly defined. Use escrow sparingly and tie release timing to clear milestones.
And set a completion timeline that fits human reality. London deals stack on school holidays, quarter-ends, and landlord cycles. Aiming for completion five days before Christmas looks elegant on a slide and miserable in practice. We set long-stop dates that permit slippage without blowing up trust.
Where Liquid Sunset fits
Liquid Sunset Business Brokers sits with founders and acquirers who prefer clarity over flash. Whether you are scanning a small business for sale London or hunting for off market business for sale opportunities, we build structures that reflect your goals and the facts. For owners seeking companies for sale London exposure, we balance confidentiality with competitive tension. For buyers, we help right-size leverage, calibrate earn-outs, and avoid the traps that swallow time and fees.
If your horizon includes Canada, our network covers business for sale in London, Ontario as well. The playbook carries over. We coordinate with business broker London Ontario partners, help compare businesses for sale London Ontario against UK alternatives, and translate structural choices across borders. Clients moving capital or management between the two Londons lean on us to align tax, financing, and regulatory expectations so that structure works on both sides.
A final word on judgment
No template survives the first diligence call. Good structure is not a mad-lib of clauses; it is a fitted suit that balances risk, tax, and human behavior. The right answer for a founder-led creative studio on Shoreditch High Street is not the same as for a multi-site maintenance outfit in outer zones. The tools are the same: asset versus share, cash versus contingent, warranties and indemnities, and debt that fits. The craft lies in where you set the sliders.
When buyers and sellers trust the structure, they get on with what they wanted in the first place: growth, retirement, or the next challenge. That is the quiet victory we aim for at Liquid Sunset Business Brokers, whether you are buying a business in London, buying a business London Ontario, or preparing your team for the next owner. Structure makes the difference between a deal that closes and a deal that lasts.