---
title: Selling a Business: Glossary of Terms | Stratworth Advisory
url: https://www.stratworthadvisory.com/insights/glossary/
description: Plain-English definitions of the terms UK founders meet when selling a business, from heads of terms and due diligence to earn-outs, EBITDA and TUPE.
last_updated: 2026-10-07
publisher: Stratworth Advisory Ltd
---

Reference · Selling a business

# Selling a business: *a glossary for founders*

The words that come up when you prepare to sell, explained in plain English: from heads of terms and due diligence to earn-outs, warranties and TUPE. Each term links to the guide that covers it in depth.

- By [**Nik Spencer**](https://www.stratworthadvisory.com/about-nik/)
- Published 7 October 2026
- 46 terms

## A to C

**Asset sale**: A sale in which the company sells some or all of its assets, such as equipment, contracts, stock or goodwill, rather than its shares. The buyer takes on only what is listed, and the company receives the proceeds. HMRC’s guidance on [selling or closing your company](https://www.gov.uk/guidance/corporation-tax-selling-or-closing-your-company) explains how the tax treatment differs from a share sale. Compare share sale.

**Business Asset Disposal Relief**: A Capital Gains Tax relief that can reduce the tax paid when you sell all or part of a business, if detailed conditions are met. It was formerly called Entrepreneurs’ Relief. The rules change; see [GOV.UK](https://www.gov.uk/business-asset-disposal-relief) and take advice.

**Buyout**: The purchase of a majority stake in a company, gaining control of its day-to-day operations. The British Business Bank’s guide to [private equity](https://www.british-business-bank.co.uk/business-guidance/guidance-articles/finance/private-equity) describes the main kinds. See management buyout and leveraged buyout.

**Completion**: The point at which a sale legally takes place: ownership passes, and the price, or the part due at that point, is paid.

**Completion accounts**: Accounts drawn up as at the completion date and used to adjust the price for the actual level of items such as cash, debt or working capital. Compare locked box.

**Confidentiality agreement**: An agreement, also called a non-disclosure agreement or NDA, under which a potential buyer or adviser agrees to keep information about the business confidential. It is usually signed before detailed information is shared.

**Customer concentration**: The share of revenue that depends on a small number of customers. See [Customer concentration risk](https://www.stratworthadvisory.com/insights/customer-concentration-risk/).

## D to E

**Data room**: The organised set of documents a buyer’s advisers review during due diligence, usually held in a secure online folder. See [Due diligence: what a buyer will check](https://www.stratworthadvisory.com/insights/due-diligence-checklist-for-sellers/#data-room).

**Deferred consideration**: Part of the price paid after completion on fixed terms, rather than depending on how the business performs. Compare earn-out.

**Disclosure letter**: A letter from the seller setting out exceptions to the warranties in the sale agreement. Matters fairly disclosed in it are generally excluded from warranty claims, depending on the agreement’s terms. Your solicitor prepares it.

**Due diligence**: The buyer’s detailed examination of a business before committing: financial, tax, legal, commercial, people and operational. ICAEW describes the strands of [transaction services](https://www.icaew.com/technical/corporate-finance/transaction-services). See [Due diligence: what a buyer will check](https://www.stratworthadvisory.com/insights/due-diligence-checklist-for-sellers/).

**Earn-out**: An arrangement in which part of the price depends on how the business performs after the sale, measured against agreed targets over an agreed period. It can bridge a gap between what a seller wants and what a buyer will pay up front, but it ties part of the seller’s outcome to decisions the new owner makes.

**EBITDA**: Earnings before interest, tax, depreciation and amortisation: a commonly used measure of business performance and one of the measures that may be considered when assessing value.

**Employee ownership trust (EOT)**: A trust that holds a controlling interest in a company for the benefit of its employees. HMRC describes an EOT as a special type of trust set up to hold a controlling interest in a trading company for the benefit of the company’s employees. The tax rules have changed recently; see HMRC’s [HS277 helpsheet](https://www.gov.uk/government/publications/employee-ownership-trusts-and-capital-gains-tax-self-assessment-helpsheet-hs277) and take advice.

**Enterprise value**: The value of the business as a whole, regardless of how it is financed. Compare equity value.

**Equity value**: Broadly, the value attributable to the shareholders after allowing for items such as debt and cash. The precise calculation depends on the transaction.

**Exclusivity**: A period during which the seller agrees not to negotiate with other buyers, usually granted when heads of terms are agreed, so that the buyer has the confidence to spend money on due diligence.

**Exit planning**: Preparing for a founder’s exit from the business: the goals, the route, the timing, and the changes that make the business ready. See [exit planning](https://www.stratworthadvisory.com/exit-planning/) and [How to write an exit plan](https://www.stratworthadvisory.com/insights/how-to-write-an-exit-plan/).

**Exit route**: The way the owner leaves: for example a trade sale, private equity, a management buyout, an employee ownership trust or family succession. See [Exit routes explained](https://www.stratworthadvisory.com/insights/exit-routes-explained/).

## F to L

**Family office**: A private investment company that manages the wealth of a family or an individual. The British Business Bank describes a sale to a family office or a high net worth individual as similar in many respects to a private equity transaction.

**Founder dependency**: Also called owner dependency: the extent to which a business relies on its founder for decisions, relationships, know-how or sales. See [How to make your business less dependent on you](https://www.stratworthadvisory.com/insights/reduce-owner-dependency/).

**Heads of terms**: A document recording the main terms agreed in principle, such as the price, the structure, the timetable and the seller’s role afterwards. It is usually not legally binding on the main points, although terms such as exclusivity and confidentiality often are.

**Indemnity**: A promise in the sale agreement to compensate the buyer for a specific, identified risk if it materialises. Compare warranty.

**Information memorandum**: A document prepared for potential buyers that describes the business, its history, its market and its numbers. It is shared under a confidentiality agreement.

**Leveraged buyout**: A buyout financed largely with borrowed money. The British Business Bank describes it as an acquisition largely financed through borrowed funds.

**Locked box**: A pricing mechanism in which the price is fixed by reference to a balance sheet at a date before completion, with protections against value leaving the business in between. Compare completion accounts.

## M to R

**Management buy-in (MBI)**: The purchase of a business by an outside management team, who then lead it.

**Management buyout (MBO)**: The purchase of a business by its existing management team. See [Management buyouts explained](https://www.stratworthadvisory.com/insights/management-buyout-explained/).

**Normalised earnings**: Profit adjusted to remove one-off or unusual items, such as non-recurring costs or the way the owners are paid, to show what the business earns in a typical year. The British Business Bank’s guide to [selling your business](https://www.british-business-bank.co.uk/business-guidance/guidance-articles/business-essentials/selling-your-business) notes that acquirers typically value a company by a multiple of normalised earnings, or by discounted cash flows.

**People with significant control (PSC)**: The individuals who own or control a company. Companies must keep a register of them; see [GOV.UK](https://www.gov.uk/guidance/people-with-significant-control-pscs).

**Private equity**: Investment firms that invest in privately owned businesses, often taking significant or controlling stakes, with the aim of increasing value over an investment period.

**Recurring revenue**: Revenue that repeats under contracts, subscriptions or established buying patterns, giving a buyer more confidence in future income.

**Restrictive covenants**: Promises by the seller not to do certain things after the sale, such as competing with the business or approaching its customers or staff, for an agreed period.

**Retention**: Part of the price held back, often in a separate account, for an agreed period to cover potential claims under the sale agreement.

## S to Z

**Sale and purchase agreement (SPA)**: The main legal contract for a sale. It sets out what is being sold, the price and how it is paid, the warranties and indemnities, and the other terms.

**SCALE2SELL®**: Stratworth Advisory’s exit readiness framework: three dimensions of worth and eight strategic pillars, each scored from 1 to 5, with a toolkit of practical worksheets and scorecards for each. See [SCALE2SELL®](https://www.stratworthadvisory.com/scale2sell/).

**Share sale**: A sale of the shares in the company, so that the buyer takes on the company with all its assets, contracts, history and liabilities. HMRC’s guidance on [selling or closing your company](https://www.gov.uk/guidance/corporation-tax-selling-or-closing-your-company) explains that shareholders are then liable for Capital Gains Tax on any increase in the value of their shares. Compare asset sale.

**Succession planning**: Planning who will lead, and who will own, the business after its founder. See [Exit planning vs succession planning](https://www.stratworthadvisory.com/insights/exit-planning-vs-succession-planning/).

**Trade sale**: The sale of a business to another company, often in the same or a related sector.

**TUPE**: The Transfer of Undertakings (Protection of Employment) Regulations, which can protect employees’ jobs and terms when a business, or part of one, changes hands. See [GOV.UK](https://www.gov.uk/transfers-takeovers) and [Acas](https://www.acas.org.uk/tupe-transfers).

**Valuation mapping**: In SCALE2SELL®, looking at each driver of value, how strong the evidence behind it is and what would improve it. It is not a formal valuation. See [What makes a business worth more?](https://www.stratworthadvisory.com/insights/what-makes-a-business-worth-more/#valuation-mapping)

**Value drivers**: The characteristics that give a buyer confidence in a business’s future profits, such as recurring revenue, a spread of customers, a strong team and reliable numbers. See [What makes a business worth more?](https://www.stratworthadvisory.com/insights/what-makes-a-business-worth-more/)

**Vendor due diligence**: Due diligence commissioned by the seller before going to market, so that problems are found and fixed on the seller’s timetable and the findings can be shared with buyers.

**Walk-away number**: The minimum overall outcome from an exit that would meet the founder’s objectives. It is a personal planning figure, not a valuation of the business.

**Warranty**: A statement about the business in the sale agreement. If it proves untrue, the buyer may be able to claim, subject to what was disclosed and to the agreement’s limits. Compare indemnity.

**Working capital**: The money tied up in running the business day to day: broadly, stock and the money customers owe, less the money owed to suppliers. A sale agreement often sets the normal level the business must be handed over with.

## Sources

1. [GOV.UK (HMRC): Corporation Tax, selling or closing your company](https://www.gov.uk/guidance/corporation-tax-selling-or-closing-your-company)gov.uk
2. [GOV.UK: Business Asset Disposal Relief](https://www.gov.uk/business-asset-disposal-relief)gov.uk
3. [British Business Bank: Private equity](https://www.british-business-bank.co.uk/business-guidance/guidance-articles/finance/private-equity)british-business-bank.co.uk
4. [ICAEW: Transaction services (due diligence)](https://www.icaew.com/technical/corporate-finance/transaction-services)icaew.com
5. [HMRC: Employee Ownership Trusts and Capital Gains Tax (HS277)](https://www.gov.uk/government/publications/employee-ownership-trusts-and-capital-gains-tax-self-assessment-helpsheet-hs277)gov.uk
6. [British Business Bank: Selling your business](https://www.british-business-bank.co.uk/business-guidance/guidance-articles/business-essentials/selling-your-business)british-business-bank.co.uk
7. [GOV.UK: People with significant control (PSCs)](https://www.gov.uk/guidance/people-with-significant-control-pscs)gov.uk
8. [GOV.UK: Business transfers, takeovers and TUPE](https://www.gov.uk/transfers-takeovers)gov.uk
9. [Acas: TUPE transfers](https://www.acas.org.uk/tupe-transfers)acas.org.uk

All sources checked in October 2026. Definitions are general: the meaning of a term in your own deal is set by its documents.

**About this glossary.** Written by Nik Spencer, founder of Stratworth Advisory (34 years of founder experience, 3 successful business exits). Published 7 October 2026; last updated 7 October 2026. It is general information for UK business owners, not advice on your circumstances.

Stratworth Advisory provides strategic business guidance only and does not offer regulated financial, legal or investment advice. Clients should seek independent professional advice where appropriate.

Next step

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Stratworth Advisory provides strategic business guidance only and does not offer regulated financial, legal or investment advice. Clients should seek independent professional advice where appropriate.

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