Selling or buying a business in NSW follows a clear process. Each stage builds on the last. Timing can stretch if third party approvals are needed, especially for franchised businesses. Here’s how the process usually works.
1. Heads of Agreement or Memorandum of Understanding
The parties often start with a Heads of Agreement (HOA) or Memorandum of Understanding (MOU). This short document records key commercial terms — price, deposit, settlement date, stock. It gives a roadmap for the lawyers to draft the full contract. While mostly non-binding, it usually includes binding rules on confidentiality and exclusivity, which give both parties comfort to move forward.
2. Due Diligence
Next comes due diligence. The purchaser checks the business in detail — finances, tax, supplier contracts, customer arrangements, staff entitlements, and intellectual property. In a franchise, the review also covers the franchise agreement, disclosure document, and operations manual. This stage helps the purchaser confirm the business is sound and the risks are known.
3. Exchange of Contracts
Once due diligence is complete, the parties exchange contracts. At this point, the deal is binding, subject to any conditions like finance or landlord approval. The purchaser pays the deposit into trust. The period between exchange and settlement gives time to line up approvals, finance, and pre-completion steps.
4. Third Party Consents
The deal cannot move to completion without key third party consents. These include:
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Franchisor approval: The franchisor must approve the purchaser. Almost always, the purchaser must sign the current franchise agreement, not the outgoing one. The Franchising Code of Conduct requires the franchisor to give disclosure and allow a 14-day consideration period. This can delay settlement.
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Landlord consent: If the business operates from leased premises, the landlord must approve an assignment or new lease. Landlords can take time and impose conditions.
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Licensor consent: If the business relies on licences (for example, IP or distribution rights), the licensor may also need to consent.
Because of these requirements, consents often control the timeline. Sale agreements usually allow extra time or conditions precedent to cover this stage.
5. Pre-Completion Checks and Stocktake
As settlement nears, both sides complete final checks. A stocktake may occur to confirm the value of stock, which adjusts the price. Employees are offered new contracts if they transfer under the Fair Work Act. Security interests on the PPSR must be released. The purchaser confirms finance. In franchises, the purchaser may also complete mandatory training.
6. Completion
Completion is settlement day. The purchaser pays the balance of the price, adjusted for rent, outgoings, staff entitlements and utilities. The vendor hands over keys, records, IP and business assets. Lease, franchise and licence documents are signed. Security interests are released. From this point, the purchaser controls the business.
7. Post-Completion Obligations
Obligations do not end at settlement. Vendors are often bound by restraints of trade, which stop them competing for a set time and area. They may also provide training and assistance, in addition to franchisor training, to help the purchaser take over. Sometimes final reconciliations — such as stock adjustments — happen after handover.
Final Word
A business sale in NSW moves through set stages — from heads of agreement to post-completion obligations. Each stage matters. Franchised businesses take longer, as franchisor approvals and cooling-off periods add time. Understanding the process helps both vendor and purchaser plan ahead and avoid surprises.
At Magnolia Legal, we guide clients through every step. We manage the paperwork, negotiate the tricky parts, and keep the process on track from first agreement through to handover.