Selling a business is often viewed as the finishing line. For many SME owners, it represents years of work, risk, reinvestment and personal commitment finally being converted into value.

But the sale process itself can create risks that are easy to underestimate.

Most owners focus heavily on valuation, finding the right buyer and negotiating the headline price. Those are important, but they are only part of the picture. The detail behind the deal can have just as much impact on the final outcome, especially when due diligence, warranties, indemnities, deferred consideration and post-completion claims come into play.

For owners preparing to sell, the question is not only ‘what is my business worth?’ It is also ‘what could come back to affect me after the deal is signed?’

Completion does not always mean the end of risk

A common misconception is that once a sale completes, the seller can simply walk away. In practice, many business sales include ongoing obligations for the seller.

The buyer will usually expect a detailed set of warranties in the Sale and Purchase Agreement. These are statements about the condition of the business, its finances, contracts, employees, assets, liabilities, tax position and other key areas. If a warranty later proves to be inaccurate, the buyer may have grounds to bring a claim.

For SME owners, understanding their personal liability risk after selling a business is an important part of preparing for a cleaner exit. Even where a deal appears straightforward, the wording of the agreement, the accuracy of disclosures and the scope of warranties can all affect the seller’s position after completion.

As John Goodson, Client Director at Macbeths, explains: “Many owners assume the risk ends when the deal completes. In reality, the warranties and statements made during a sale can leave sellers exposed if issues are discovered later. That is why preparation, disclosure and specialist advice matter before terms are agreed.”

This is where owners can be caught out. Even if there is no intention to mislead, a historic issue, missing record or poorly disclosed problem can create friction after completion. The risk is often higher in owner-managed businesses, where key information may sit with a small number of people rather than in a formalised reporting structure.

A buyer does not want surprises after paying for a business. If they discover something that affects the value of what they have bought, they may look for a route to recover that loss.

The risks SME owners often overlook

Every transaction is different, but there are several areas where SME owners often underestimate their exposure.

1. Incomplete or rushed disclosure

Disclosure is one of the seller’s main protections during a business sale. If a known issue is properly disclosed to the buyer before completion, it can reduce the chance of that issue forming the basis of a later warranty claim.

The problem is that disclosure is often rushed. Owners may be balancing the transaction with the day-to-day running of the business, while also dealing with advisers, buyers, employees and confidentiality concerns.

Examples of issues that may need careful disclosure include:

• Customer disputes
• Supplier contract issues
• Late payments or bad debt
• Employment grievances
• Health and safety incidents
• Regulatory concerns
• Pending tax queries
• Lease or property issues
• Data protection breaches
• Software licensing gaps

None of these automatically prevents a sale, but failing to identify and disclose them clearly can create unnecessary risk.

2. Overconfidence in financial records

Many SME owners know their numbers well, but buyer due diligence will often go deeper than management accounts or year-end figures.

Buyers may test revenue quality, customer concentration, recurring income, margins, stock value, debtor recoverability, working capital and normalised profit. They may also look for unusual adjustments, related-party transactions or dependencies on the current owner.

If the buyer finds inconsistencies late in the process, the result may be a reduced valuation, delayed completion, a demand for additional warranties or a larger retention.

Strong financial preparation is not just about presenting the business well. It is about reducing the chance of the deal being renegotiated when momentum should be building.

3. Contract and customer risks

For many SMEs, value is tied closely to customer relationships and key contracts. That creates risk if those contracts are informal, poorly documented or dependent on the current owner.

Owners should pay particular attention to:

• Change-of-control clauses
• Termination rights
• Exclusivity provisions
• Personal guarantees
• Long-term pricing commitments
• Verbal or informal agreements
• Contracts due for renewal shortly after completion

A buyer may be concerned if significant revenue could disappear after the sale. Even where there is no immediate problem, unclear contract terms can weaken the seller’s position during negotiation.

4. Employment and people issues

People risks are often underestimated, especially in smaller businesses where HR processes may have developed informally over time.

Potential issues include unclear employment contracts, undocumented bonus arrangements, unresolved grievances, restrictive covenant concerns, holiday pay issues, contractor status questions and key-person dependency.

A buyer will want to understand whether the business can continue to operate effectively after the owner exits. If knowledge, client relationships or operational control sit too heavily with one person, the buyer may seek additional protections or reduce the price.

For this reason, succession planning and management structure can be just as important as financial performance.

5. Tax, VAT and historic liabilities

Tax and VAT issues can be particularly sensitive because they may relate to periods before the buyer owned the business. Buyers will often seek warranties or indemnities to protect themselves from historic liabilities.

This does not mean every business needs to have a perfect tax history before going to market. But it does mean sellers should understand any areas of uncertainty and take appropriate tax advice before they become buyer concerns.

Waiting until due diligence is underway can leave the seller with less control over the narrative.

6. Data, cyber and systems risk

Cyber and data protection risks are now part of mainstream transaction due diligence. Buyers may want to know how customer data is held, whether systems are secure, whether there have been historic breaches and whether software licences are valid and transferable.

For SMEs, this can be a weak spot. Systems may have been built gradually over many years, with old platforms, shared logins, informal processes or unclear ownership of digital assets.

A buyer does not just want the trading business. They want confidence that the infrastructure supporting it is stable, compliant and transferable.

7. Deferred consideration and earn-outs

Not every sale is paid entirely on completion. Some deals include deferred consideration, earn-outs or performance-based payments. These structures can help bridge a valuation gap, but they also create risk for the seller.

If future payments depend on performance after completion, the seller needs to understand how that performance will be measured and who controls the factors that influence it.

Common points of dispute include:

• Revenue recognition
• Cost allocation
• Management control
• Customer retention
• Integration decisions
• Accounting treatment
• Targets that are not clearly defined

A headline price can look attractive, but the certainty of payment matters just as much.

How owners can reduce risk before going to market

The strongest position is usually built before the business is formally marketed. Once a buyer is engaged and due diligence has started, the seller has less time and less control.

Owners considering a sale should take practical steps early.

Get the business sale-ready

This means organising financial records, contracts, policies, employee documentation, supplier agreements, leases, licences and corporate records before they are requested.

A clean data room can give buyers confidence and reduce delays. It also helps advisers identify issues before they become deal obstacles.

Review the likely warranties in advance

Owners should not wait until late in the process to think about warranties. Reviewing the likely warranty areas early can help identify where information is missing, where disclosures may be needed and where advice should be taken.

This can also prevent sellers from agreeing to statements they cannot properly verify.

Resolve obvious issues where possible

Some issues cannot be fixed before sale, but many can be improved.

For example, expired contracts can be renewed, informal employee arrangements can be documented, customer disputes can be resolved, software licences can be checked and governance records can be updated.

These actions may seem administrative, but they can support buyer confidence and reduce negotiation pressure.

Take advice early

A business sale is not the time to rely on assumptions. Legal, tax, accounting and corporate finance advice should be brought in early enough to shape the transaction, not just react to it.

For some transactions, insurance advice is also worth including in the conversation before terms are finalised. Alongside legal, tax and financial input, specialist mergers and acquisitions insurancecan help address certain risks connected to warranties, indemnities and post-completion claims. The suitability of this type of cover will depend on the structure of the deal, the size of the transaction and the specific risks being transferred, and any cover will be subject to policy terms, conditions and exclusions.

The important point is timing. Insurance should not be treated as a last-minute consideration once the deal is already advanced. If it may be relevant, it is better to explore it early.

The value of a cleaner sale process

A well-prepared sale process does not only reduce risk. It can also protect value.

Buyers are more likely to challenge price or seek additional protections when they find uncertainty. By contrast, a seller who can provide clear records, sensible disclosures and a well-organised due diligence process is usually in a stronger negotiating position.

This does not mean hiding weaknesses. It means understanding them, addressing them where possible and disclosing them properly where needed.

For SME owners, this can make the difference between a sale that proceeds smoothly and one that becomes slower, more expensive and more stressful than expected.

A final checklist for SME owners preparing to sell

Before going to market, owners should ask themselves:

• Are our financial records complete, consistent and easy to explain?
• Are key customer and supplier contracts properly documented?
• Do any contracts include change-of-control clauses?
• Are employee contracts, policies and records up to date?
• Are there any unresolved disputes, claims or complaints?
• Have we reviewed tax, VAT and historic liabilities?
• Are software, data and cyber risks properly understood?
• Could the buyer ask for deferred consideration, retention or escrow?
• Are we clear on what warranties we may be asked to give?
• Have we taken advice on how to reduce post-completion exposure?

Selling a business is one of the most important commercial decisions an owner can make. The most successful exits are rarely built at the negotiation table alone. They are built through preparation, clear records, early advice and a realistic understanding of where risk may sit after completion.

For owners thinking about a sale, the best time to address these issues is before the buyer starts asking difficult questions.

This article was written by

Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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Britain’s night-time economy has rarely been short of warnings about its own mortality. What is new is the willingness of its trade body to name a politician it believes can do something about it.

The Night Time Industries Association (NTIA) has publicly backed Andy Burnham’s call for a cut to VAT across hospitality and the wider night-time economy, arguing that the sector cannot withstand three more years of rising taxation, fragile consumer confidence and what it describes as a failure of political will. It is an unusually pointed intervention from an organisation that is careful to stress it remains apolitical, and it lands at a moment when the campaign to lower hospitality’s tax burden has acquired real momentum.

The association’s central contention is straightforward. Nightclubs, bars, pubs, restaurants, live music venues, festivals, event organisers and cultural institutions are being squeezed simultaneously by VAT, employer National Insurance contributions, business rates and stubbornly high energy costs. The result, the NTIA argues, has been a steady attrition of venues, cancelled events and retreating investment across what it calls one of the country’s most important cultural and employment sectors. The trade body has long called for a VAT cut to halt a string of nightclub closures, and its language has hardened as the closures have continued.

Why Burnham, and why now? The Greater Manchester mayor put himself at the centre of the debate at this year’s Night Time Economy Summit in Liverpool, where, speaking alongside former Deputy Prime Minister Angela Rayner, he told an audience of operators and national media that he would “argue for a VAT rate more consistent with what you find in Europe because of the social value that your businesses bring to places and towns.” For an industry that has spent years lobbying with little to show for it, a senior political figure putting VAT explicitly on the table was a moment worth seizing.

Michael Kill, chief executive of the NTIA, framed the endorsement as a matter of survival rather than party allegiance. “We are apolitical as an organisation, but we are not neutral when it comes to the survival of our industry,” he said. “The hospitality and night-time economy sectors are under more pressure than at any point in recent memory. Businesses are being crippled by taxation at a time when margins have been eroded, consumer confidence remains fragile and operating costs continue to rise.”

Kill was blunt about the choice he believes operators now face. “The reality is that our industry cannot survive three more years of the current approach. Businesses are closing, investment is drying up and confidence has collapsed,” he said. “What many operators now see is a stark choice: three more years of economic uncertainty and additional pressure on already struggling businesses, or a change in leadership and direction that finally recognises the value of hospitality, nightlife, festivals, events and culture to the UK economy.”

His sharpest warning concerned the prospect of further tax rises. “What worries us most is that, while businesses are already struggling under unprecedented pressure, there are now discussions about increasing taxes even further. For many operators, there is simply nothing left to give.” Hospitality and nightlife, he argued, should be treated as economic drivers and major employers rather than “a convenient source of revenue.”

The NTIA’s intervention does not exist in a vacuum. The wider trade has coalesced around the #VATsTheProblem campaign, fronted by chef and publican Tom Kerridge and backed by UKHospitality, the British Beer and Pub Association and others, which is pressing for a reduction in hospitality VAT from 20 per cent. The accompanying petition passed 200,000 signatures within days of launching, a measure of how raw the issue has become. Sentiment was hardly improved by the summer’s “Great British Summer Savings” package, which cut VAT to 5 per cent on family attractions but conspicuously snubbed the night-time economy, a slight the NTIA has not forgotten.

The case for relief rests on a simple proposition: that a lower VAT rate would protect jobs, stimulate consumer spending and safeguard the venues, festivals and cultural spaces that anchor town and city centres. The case against — that the Treasury can ill afford to forgo the revenue when the public finances are stretched — is equally familiar, and it is the argument the sector has run up against for the better part of a decade.

For now, the NTIA is betting that one of the few politicians willing to engage on its terms also happens to be among the most plausible future occupants of Downing Street. Burnham is not in government, and three years of this Parliament remain. But in backing him so openly, the association has made a calculated wager that a change of direction is more likely to come from championing an outside contender than from continued, unrewarded loyalty to the status quo. Whether that bet pays off will depend less on the strength of the industry’s case, which is well rehearsed, than on the political arithmetic of the next three years.

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Britain risks losing yet more high street shops, and becoming a dumping ground for unsafe imports, unless ministers move faster to close a tax loophole being exploited by overseas sellers, retailers have warned.

Andrew Murphy, chief executive of The Entertainer, the toy chain that trades from more than 150 stores, has voiced “grave concern and profound frustration” at the government’s plan to wait until 2029 before scrapping the £135 “de minimis” customs threshold.

The rule lets overseas sellers, among them the Chinese ecommerce giants Temu and Shein, ship parcels worth less than £135 into the UK without paying customs duties. British retailers importing goods in bulk, by contrast, must pay duties, VAT and compliance costs on every consignment. It is a structural disadvantage that domestic players have been pressing the government to end for months.

In a letter to ministers seen by The Times, Murphy branded the timetable an “unacceptable delay to reform”, arguing that it “extends by years the existence of an uneven playing field with respect to foreign marketplace sellers”. The postponement, he wrote, was “wholly indefensible and deeply damaging to UK retailers in an era already characterised by extreme economic challenge for the sector”.

The intervention lands shortly after Temu was fined €200 million by the European Commission, which found the platform had allowed the sale of illegal and unsafe products, including dangerous baby toys and defective phone chargers. The penalty, the largest yet handed down under the EU’s Digital Services Act, followed regulators’ conclusion that Temu had failed to properly assess the systemic risks its marketplace posed to consumers. The Commission set out its findings in detail, noting that a mystery-shopping exercise found phone chargers failing basic electrical safety standards and baby toys carrying medium-to-high safety risks. Temu has rejected the assessment.

Platforms such as Shein and Temu have expanded rapidly in Britain by selling very cheap products shipped directly from manufacturers. Their rise has drawn complaints from domestic retailers, among them Sainsbury’s, Currys and AO World, who argue the tax treatment hands overseas rivals an unfair advantage. The growing pressure prompted the Chancellor to order a review of the loophole last year.

The government confirmed last year that it would abolish the de minimis exemption, but not until 2029. Ministers say a gradual transition is needed to avoid the border disruption and customs delays seen in the United States after it removed its own exemption for low-value imports.

Murphy pointed out that the US abolished its $800 exemption last August, and that the European Union will introduce a temporary customs duty on low-value parcels from next month ahead of wider reforms. “The UK, by contrast, will not even begin imposing duties until some time in 2029,” he wrote, warning that Britain risked becoming an “ecommerce dumping ground” as sellers diverted goods away from markets where tighter rules were taking hold.

He cited research by the British Toy and Hobby Association (BTHA), which has been buying and testing toys from online marketplaces since 2018. In its latest investigation, 86 per cent of around 90 toys bought from seven marketplaces, including Temu, Shein, Amazon, eBay and TikTok Shop, failed safety tests, with a further 4 per cent breaching UK labelling standards. Murphy said the loophole had become a “route by which unsafe goods can and do enter the UK” and reach the public.

Geoff Sheffield, chairman of the Toy Retailer Association, said non-compliant products were “a major concern for all our members, from the largest multinationals to the smallest independent shops”. Such toys, he added, “not only put children at risk of harm and damage the reputation of the entire industry, but they undercut genuine UK toy retailers”. The government, he said, needed to “accelerate the legislation to prevent more of our members disappearing from the UK high street”.

The warning comes against a grim run for big toy retailers. Toys R Us closed more than 100 shops after collapsing into administration, while Hamleys, Woolworths and Mothercare have all shut stores over the years, part of a longer roll-call of familiar names that have vanished from the high street.

Helen Dickinson, chief executive of the British Retail Consortium, said faster reform was needed to protect more businesses. “Every day the government delays introducing a new customs system for low-value imports is another day that harms British businesses,” she said. “With the US and EU already moving quickly to close this loophole, the UK stands alone, increasing the risk that even more goods could be dumped on our market.”

A Treasury spokesman said: “The rapid growth in low-value imports is hurting our high streets and retailers. We are removing the customs duty relief for low-value imports and reforming the way these goods are declared into the UK to ensure all goods are appropriately controlled.” The reform, he added, “backs our businesses to compete and grow, controls safety and flow of goods at our border, and keeps the UK in line with our international partners”.

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Mumbai: The board of the Securities and Exchange Board of India (Sebi) on Friday approved several proposals aimed at giving companies more flexibility on implementing buybacks.

These include the reintroduction of open market buybacks through exchanges, the relaxation of borrowing norms for mutual funds and faster fundraising routes for alternative investment funds (AIFs).

The capital market regulator also approved proposals to simplify the transmission of securities and adopted a new code of conduct for its board members.

Currently, buybacks have to be made through the tender-offer route and the open-market route through bookbuilding.

Amendment to MF Regulations

“Considering the revised taxation framework applicable for buybacks, open market buyback through stock exchange is being reintroduced with effect from August 1 to provide additional route for the company to undertake buyback,” Sebi said.
Under the revised framework, buybacks executed through stock exchanges must be completed within 66 working days, with at least 40% of the earmarked funds deployed during the first half of the buyback period. Companies will also be required to communicate buyback details directly to shareholders electronically via email and phone messages in addition to newspaper advertisements. Promoter holdings will remain frozen at the security level during the buyback period, while the appointment of a merchant banker has been made optional to lower compliance costs. “Sebi’s decision to allow two buybacks in a year aligns the regulations with the Companies Act and provides listed companies greater flexibility in capital management-critical when India Inc. has already announced buybacks worth ₹25,000 crore in 2026 so far, the highest since 2023,” said Makarand M Joshi, founder partner MMJC and Associates, a corporate compliance firm. “The move to reintroduce open market buybacks and discretion in appointment of merchant bankers for buybacks shifts responsibility to the company, stock exchanges, and statutory auditors. This would raise the bar on board-level and auditor accountability.”
The regulator’s board also approved an amendment to mutual fund regulations to permit intraday borrowings for managing liquidity mismatches arising from settlement timing differences, foreign exchange settlements and mark-to-market obligations on derivative positions.

Mumbai: Indian technology stocks slumped Friday, with the gauge representing the bellwethers losing more than 6% during the day and closed 3.7% lower, after the world’s biggest outsourcing company by market value, Accenture, slumped 20% on revenue forecasts and order bookings that trailed Wall Street expectations.

Battered by AI-spawned disruptions, Accenture has now lost nearly 50% in a year, putting a question mark on the sustainable competitive advantage of the Indian-listed pureplay that had hitherto relied largely on outsourcing-led cost arbitrage to build a $280-billion industry over the past three decades. For Accenture, which often provides the cue for India’s outsourcing industry, its initial 20% loss Thursday was the worst in its trading history.

The Nifty IT index slumped as much as 6.4% during the day and closed at 27,426.85-the lowest level since May 14. The Nifty declined 0.6%. Infosys slumped 6.5% while Tata Consultancy Services (TCS) lost 3.1%.

Accenture’s guidance and circumspect commentary triggered the sell-off for the second straight day. Battered valuations limit downside in these stocks, analysts believe, but lack of clarity on growth in a world powered by AI offers restricted scope for upside, too.
“Most of the negatives are priced in and the valuations are now at a discount to Nifty valuations,” said Sunny Agrawal, analyst at SBI Securities. “So, stocks are expected to stabilise but the growth outlook remains hazy.”

Large-cap IT companies guided for tepid growth of 2-5% while midcaps like Coforge, Persistent Systems expect low double-digit growth, he said.
All constituents of the IT index declined except Oracle Financial Services Software that bucked the weak trend and gained 2.9%. LTM dropped 4%, while Mphasis slipped 2.9% lower. Tech Mahindra, HCL Technologies, and Persistent Systems fell over 2% each.Accenture’s guidance suggests the likelihood of further pain in the next couple of quarters as revenue revival has taken a backseat, said Ajit Mishra, SVP Research at Religare Broking.

“The Nifty IT Index is on the verge of retesting the 2023 lows of 26,300 from where it had rebounded to a record high of around 46,000 levels,” he said. “If it fails to hold these levels then it can slide lower to 24,200-24,300 levels.”

Mishra said that the Infosys breached a major trendline on the monthly chart and a breakdown below ₹1,040 could confirm further breakdown.

So far this year, the Nifty IT index plunged 27.6% while benchmark Nifty fell 8.1%.

“IT has lost investor favour due to likely AI led deflationary impact and uncertainty on growth from AI led offerings for clients,” said Agrawal. “Investors should wait for the Q1 commentary to deploy funds in IT sector.”

“That said, there are better opportunities available in the equities across sectors like banking, auto ancillary, hotels, defence,” he added.

Mishra said that investors should stick to the winners from the pack rather than adding stocks simply because valuations are attractive.

“Investors should avoid fresh positions in IT stocks for the short-to-medium term and refrain from adding to existing bets for now,” he said. “HCL Technologies, Oracle and Coforge are relatively better placed over a one-to-two-year timeframe.”

Mumbai: State Bank of India (SBI), Axis Bank, Bank of Baroda (BoB) and government-owned non-bank lender Power Finance Corporation (PFC) will tap the overseas bond markets, perhaps as early as next week, to collectively raise at least $2 billion, multiple bankers directly associated with these fundraising initiatives told ET.

These financial institutions are raising money overseas to take advantage of the 1.5% fixed rate swap provided by the Reserve Bank of India (RBI) on external commercial borrowings (ECBs).

The central bank had announced the swap incentives during its last monetary policy review (MPC) meeting held on June 5.

Also Read: HDFC raises $750-m ECB, first under RBI’s special swap plan

Bankers familiar with the fundraising said financial institutions with ready medium-term note (MTN) programmes will have an advantage as they would have a ready investor base to approach for the latest ECB tranche.

“We will see the first busy period for ECB fundraising next week. HDFC Bank kicked off the fundraising and now the other large Indian bank, SBI, will also join in and it could be as early as Monday,” said a banker involved in these deals.
“If the market conditions are good and there are no surprises, we expect at least one large issue everyday between Monday and Thursday,” said the banker cited above.SBI, given its size and expected investor interest in India’s most valued state-run entity, could raise up to $1 billion provided market conditions are conducive next week, said the banker cited immediately above.

Other banks could look for smaller amounts — may be issues of up to $500 million — as they do not want to overextend in the first instance itself, said a banker.

“All these banks as well as PFC have running MTN programmes, which they can tap at a short notice. This gives them an advantage as they have the documents ready and can arrange to hit the markets without delay or permissions,” said another banker involved in the issues.

Also Read: RBI opens a dollar swap window to help hedge foreign borrowings

The ECB incentives are part of a broader suite of measures aimed at undergirding the rupee, which slid about a percentage point on average per month since the start of FY26. The rupee, which fell close to 97 a dollar, has since recovered to 94.32 per dollar on expectations of a peace deal in West Asia and higher dollar inflows.

Approved Plans

The executive committee of the SBI central board, for instance, had approved a $2-billion MTN programme for the current fiscal year in May. Similarly, PFC, too, has a running $8 billion MTN programme.

The individual banks cited above and PFC did not respond to ET’s mailed queries seeking their comments on the proposed ECBs until the publication of this report.

HDFC Bank’s successful dollar bond sale earlier this week has also pushed its peers to take advantage of the fine pricing. On Tuesday, HDFC Bank raised $750 million by selling five-year bonds to overseas investors through the GIFT City facility. The bond was the bank’s first overseas issue since February 2024 and was priced at 90 basis points above the five-year US treasury, the tightest spread over the US benchmark for any private sector bank in India.

In a bid to attract overseas dollars, RBI announced a special swap arrangement on June 5. The swap is open for both banks and public sector enterprises.