Buying a butcher's business through an SPV: why the sellers walked away over security
A first-time buyer leaving employment to buy a Hatfield butcher's business for a mid six-figure sum, and a deal that ended over the sellers' security
By Malcolm ZoppiRetail and e-commerce
Key facts
- Deal type
- Share purchase
- Acting for
- Buyer (an individual's SPV)
- Business
- Butcher's business, Hatfield
- Sector
- Retail and e-commerce
- Deal value
- Mid six figures
- Structure
- Share purchase by an SPV, cash-free debt-free
- Timescale
- Negotiated to the share purchase agreement; aborted before completion
- Completed
- Did not complete: the sellers withdrew
- Lead solicitor
- Malcolm Zoppi
At a glance
Our client wanted to leave employment and own a profitable business. They found an established butcher's business in Hatfield and agreed to buy it through their own SPV, by share purchase on a cash-free, debt-free basis, for a mid six-figure sum. The sellers wanted security for the part of the price they would not receive on completion. The two sides could not agree what that security should be, and the sellers walked away.
The client and the objective
For a first-time buyer, buying an established business is a way into ownership with an existing customer base and income from day one. Like most first-time buyers, the client needed the sellers to wait for part of the price.
The deal as proposed
- Share purchase of the company by the client's SPV.
- Cash-free, debt-free price, in the mid six figures.
- Part of the price payable after completion, with the sellers seeking security for it.
Why it did not complete
The sellers' position
Sellers who are paid in part after completion are trusting the buyer to pay them out of a business they no longer control. They will usually ask for security: a charge over the shares or the company's assets, or a personal guarantee from the buyer.
The buyer's position
A first-time buyer leaving employment is already taking a significant personal risk. Giving security over a home or other personal assets, or accepting restrictions that would stop them running the business freely, can make the deal unworkable from the buyer's side.
No meeting point
The parties could not find a security package both could accept, and the sellers withdrew.
Outcome
The purchase did not proceed. The client is better prepared for the next opportunity, knowing that security for deferred payments needs to be settled at the start.
What this deal shows
- Deferred consideration and security go together; expect the seller to ask.
- Decide what security you can offer before you agree heads of terms.
- A first-time buyer should weigh how much personal risk the security puts on them.
“The sellers wanted security and the buyer had already put a career on the line. When neither could move further, walking away was the honest outcome.”