Buying a business can be one of the quickest ways to grow, whether you’re acquiring a competitor, expanding into a new market, or buying your first “ready-made” business rather than starting from scratch.
But even when the purchase price is ‘only’ a few hundred thousand pounds (or a few million), the legal and tax issues can be significant. The reality is that smaller acquisitions often carry more hidden risk, because the target business may be owner-managed, less formally documented, and reliant on a few key customers or suppliers.
This guide is written for business owners, would-be business owners and SME directors considering an acquisition under around £5m, where you want a professional, robust legal process, but you also need cost control and fee transparency.
At Elysium Law, we are a barrister-led boutique firm with a tech-enabled, pragmatic approach, designed to deliver cost effective advice with transparent and flexible fees.
The most common deal structure for SMEs: the share purchase
Most of the acquisitions we advise on in the SME space are share purchases.
In a share purchase, you buy the shares in the company that owns and runs the business. The company stays the same legal entity, which means:
- the contracts often stay in place;
- employees remain employed by the same company; and
- the company’s assets and liabilities remain inside the company (and therefore become your responsibility as the new owner).
That last point is crucial: you’re not just buying the ‘good bits’. You are buying the company ‘warts and all’ unless you negotiate contractual protections.
That’s why the quality of the legal work in a share purchase is usually less about paperwork and more about:
- identifying risk early (due diligence);
- documenting what the seller is promising (warranties);
- and allocating risk fairly (indemnities, price mechanisms, disclosure).
A simple overview of the acquisition process (under £5m)
Every transaction has its own shape, but most SME share purchases follow a familiar route.
1) Initial offer and heads of terms
Once price and key commercial points are broadly agreed, the parties often record the deal in Heads of Terms (also called Heads of Agreement or a Term Sheet).
Heads of Terms are usually ‘subject to contract’ (not legally binding on the main deal), but they are still important because they:
- set expectations;
- drive the timeline; and
- prevent expensive misunderstandings later.
Cost-saving tip: A well-drafted Heads of Terms is one of the cheapest ways to avoid a costly negotiation spiral later on.
2) Confidentiality and exclusivity
Before sensitive documents are shared, you’ll usually sign an NDA (non-disclosure agreement).
Sellers often ask for exclusivity, i.e. you spend money on due diligence and lawyers while they agree not to negotiate with anyone else for a short period.
Important consideration: Exclusivity can be reasonable, but it should be:
- time-limited;
- tied to progress milestones; and
- clear about what happens if the seller delays.
3) Due diligence (legal, financial and tax)
Due diligence is the investigation stage. In a share purchase, this is where you look for anything that could make the business worth less than you think, or that might create expensive problems after completion.
Typically:
- your accountant covers financial due diligence;
- tax specialists cover tax due diligence; and
- we handle legal due diligence and coordinate the overall legal workstream.
We also work closely with highly experienced accountants and tax advisers to ensure the deal is structured sensibly from the outset (rather than trying to fix tax issues once the documents are drafted).
4) Drafting and negotiating the SPA (Share Purchase Agreement)
The Share Purchase Agreement (SPA) is the main contract. It sets out:
- what’s being bought and sold;
- the purchase price and how/when it’s paid;
- conditions to completion;
- warranties, indemnities and limitations; and
- what happens if something goes wrong.
5) Completion and post-completion
On completion day:
- money and shares change hands,
- director/shareholder changes are implemented, and
- filings are made (e.g., Companies House).
Post-completion tasks can be deceptively important – particularly if you’re changing banking arrangements, supplier accounts, insurances or key contracts.
What legal due diligence actually looks at (in plain English)
For acquisitions under £5m, legal due diligence is not about producing a glossy report that gathers dust.
It’s about asking what could hurt you after completion, and how do we either:
- fix it before you buy; or
- price it into the deal; or
- protect you contractually.
Here are the areas we commonly focus on:
- Key contracts: Are major customers/suppliers tied in? Are there change-of-control clauses that allow termination if you buy the company?
- Employment: Are there key staff, restrictive covenants, grievances, or unpaid holiday liabilities?
- Property: Is the premises owned or leased? Are there landlord consents needed for a change of control?
- IP and brand: Does the company actually own its website, domain, software, trademarks, designs and content?
- Data protection: Are there obvious compliance gaps (particularly with customer data and marketing lists)?
- Disputes: Ongoing claims, threats, historic settlement agreements, regulatory complaints.
- Corporate housekeeping: Are Companies House filings up to date? Are there missing board minutes, share issues, or unclear ownership?
- Insurance: Are policies adequate and transferable?
- Tax flags: Share purchases often involve hidden tax risk, which is why coordinated tax input matters early.
Cost-saving tip: A clean, organised data room from the seller can materially reduce fees. Conversely, poorly organised information almost always means more time (and therefore more cost).
Warranties, disclosures and indemnities: the ‘protection layer’ in a share purchase
In a share purchase, you can’t physically separate liabilities from the company, so the SPA usually becomes your protection tool.
Warranties
Warranties are contractual promises from the seller about the company (e.g. contracts, litigation, tax compliance).
If a warranty turns out to be untrue, you may have a claim, but only if:
- it’s drafted properly;
- it’s not ‘disclosed against’; and
- the contract doesn’t limit your remedies too heavily.
Disclosures
Sellers disclose known issues (e.g. “there is a dispute with Customer X”). A properly managed disclosure process is a core part of risk allocation.
Indemnities
Indemnities are usually used for known, specific risks (e.g. a tax investigation, a threatened claim, or a contaminated lease issue). They can offer more direct protection than warranties.
Timelines: how long does an SME acquisition take?
As a broad rule of thumb, many share purchases under £5m complete within 4–12 weeks once heads of terms are agreed – but it can be faster or slower depending on:
- the seller’s readiness and document organisation;
- whether there is property involved;
- how quickly due diligence questions are answered;
- the complexity of the SPA negotiations; and
- funding arrangements and lender requirements.
If speed matters, we can structure the deal plan around priorities and milestones, so you’re not paying for unnecessary drafting before the main risks are understood.
The cost question: how much should legal support cost for a share purchase under £5m?
Cost is a completely reasonable concern and, for many buyers, the legal spend is one of the few controllable variables in the transaction.
Our approach: fixed fees, scoped to your deal
We offer fixed fees, calculated based on the size and complexity of the transaction, and agreed in advance.
- Fixed fees start from £7,500 + VAT for a very simple share purchase.
- Regulated businesses (and deals with heavy property/employment complexity) generally require more work and therefore higher fees.
We are able to remain competitive because our model is built around:
- efficient, tech-enabled working practices;
- a scalable team approach; and
- transparent, flexible fees.
What drives cost up (so you can plan for it)
The biggest cost drivers on SME acquisitions are typically:
- multiple shareholders/sellers (more negotiation, more signing logistics);
- incomplete company records;
- property (leases, consents, title issues);
- complex customer contracts or change-of-control issues;
- deferred consideration/earn-outs/vendor finance; and
- regulated sectors (where approvals or compliance steps can be significant).
A quick real-world example
We regularly advise SMEs and owner-managed businesses on acquisitions.
A typical example is acting for a recruitment business carrying out a series of acquisitions of rivals to expand its market reach. In those cases, the legal work needs to be:
- repeatable (so every acquisition doesn’t reinvent the wheel);
- risk-focused (so the buyer doesn’t accumulate hidden liabilities); and
- cost-controlled (so legal fees don’t erode deal value).
That’s exactly the kind of pragmatic, commercially-minded approach we aim to bring.
Why instruct Elysium Law for an SME acquisition?
For many acquisitions under £5m, you don’t need a large City team with a long list of chargeable timekeepers.
What you need is:
- an adviser who understands deal mechanics;
- who can run a disciplined process;
- who knows where SME deals usually go wrong; and
- who keeps fees proportionate to the value of the transaction.
Elysium Law was built to provide high quality, cost effective and strategic advice, with a model designed to cut unnecessary friction and expense.
Clients frequently highlight clear explanation and cost transparency in their feedback to us.
Next step: a free, no-obligation call
If you’re considering buying a UK business – whether you’re a first-time buyer or building a buy-and-build strategy, we’re happy to have a free, no-obligation call to discuss the deal, likely risks, and how we would price the work.
You can contact us on 0151 328 1968 or email clerks@elysium-law.com.
