Selling Your Business: Know Exactly What You’re Giving Away
Recent headlines surrounding Jo Malone and her dispute with Estée Lauder have reignited an important conversation in the world of corporate transactions: when you sell a business, what are you really selling?
Following the sale of her original brand to Estée Lauder, Jo Malone has since reflected on the limitations that the deal placed on her future involvement in the industry. She has spoken openly about the sense of loss that can follow a sale, particularly where a founder’s name, identity, and creative output are closely tied to the business.
Her experience highlights a broader and familiar theme: that the implications of a deal are not always fully appreciated at the time and can give rise to regret once the commercial and legal realities begin to take effect.
At first glance, most business sales appear straightforward. Shares are transferred, assets change hands, and consideration is paid. However, seasoned practitioners know that the true substance of a deal often lies beneath the surface, particularly in the restrictive covenants and intellectual property arrangements that accompany the transaction.
In many cases, sellers tend to focus more on the hard figures but pay less attention to the long-term implications of the contractual restrictions they are entering into. This is where issues can arise.
A standard feature in most corporate deals is a suite of restrictive covenants. These commonly prevent a seller from setting up a competing business, working for a competitor, or soliciting former clients or employees. These restrictions are often time limited and geographically defined, but their practical impact can be significant.
For founders in particular, whose identity and expertise are closely tied to the business, these provisions can effectively reshape their professional future for years after the deal completes. What is frequently underestimated is how wide these restrictions can be, and how strictly they may be enforced.
The Jo Malone story illustrates a broader point: when a business is sold, the transaction may encompass far more than physical assets or shares. Brand identity, goodwill, trade secrets, and even the right to operate in a particular space may be tied up in the deal.
Sellers can find themselves surprised by the extent to which they have divested control, not just of their business, but of their ability to re-enter the market or use their own name in a commercial context.
This is why it is essential to approach a sale with a clear understanding of what rights are being assigned, the effects of any intellectual property transfer, the scope of restrictive covenants, and the practical implications for future business activity.
In corporate transactions, there is often a natural tension for sellers. Many wish to ‘cash out’ while still retaining a sense of connection or the ability to return to the industry. However, the reality is that most well-structured deals, particularly those involving established brands, require a clean break.
Attempts to ‘cling on’ to elements of the business, whether through informal understandings or loosely considered carve outs, can lead to disputes down the line. Clarity at the outset is key.
Understanding the full extent of what you are selling is not always intuitive. It requires careful legal analysis, commercial awareness, and experience in negotiating and structuring these agreements.
If you are considering a sale, or simply want to explore your options, early advice can make a significant difference, helping you protect your future as well as realising the value of your business.
ENDS
For further information please contact Liam Reilly tel 0141 226 4942