Most tech start-ups have a life cycle that reaches a point where the original investors and founder want to realise the value of the company by selling it to a larger concern. This is often a good thing because the skills needed to start a business are often not appropriate for a medium or large company. There are obvious exceptions!
But do you sell the company or sell the business? And what is the difference?
- Selling the company means transferring the shares to the new owner. The company is unchanged and everything carries on as normal.
- Selling the business is more complicated. The acquiring company takes over the assets, intellectual property, customer base, trade marks and staff. The acquiring company may be a new one, possibly with a very similar name, or the business gets integrated into an existing company. The original owner retains the old company and bank account as well as outstanding payments and receipts. The purchaser may require a change of name and might insist that the old owner does not compete with them.
Selling the company is obviously the simplest thing to do. But why only transfer the business and what are the benefits?
The main benefit for the buyer is that they leave behind any risks. They are not going to be bothered by unpaid invoices and outstanding legal issues (but not those concerning intellectual property). They have to tell the customers to pay money into a new bank account, but this is generally not a big issue.
From the sellers point of view, there is no clean break. They continue to receive any outstanding receipts and have to settle any outstanding costs. They can liquidate the company whenever they wish.
The decision of which way to go will probably be up to the purchaser rather then the seller. Either way, a lawyer needs to be involved (Not me). But I disposed of the two businesses I was involved in both ways. I was totally unaware of the difference when I went into this, so I thought a blog post would be useful.
Bob Browning's blog 
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