Licences or permits that do not transfer

Many businesses need official permission to trade. Examples include alcohol licences, food business registrations or permits, healthcare and childcare registrations, transport operator licences, waste and environmental permits, trade or contractor licences and financial services authorisations. If that permission cannot move to you, or cannot be obtained in time, you may be buying a business that is not allowed to operate.

Licences attach to different things. Some are granted to a company, some to a site and some to a named person, often the owner or a qualified manager. That difference decides what happens on a sale. In an asset sale the buyer often has to apply afresh. In a share sale the company usually keeps its licences, but many regulators still expect to be told about a new owner, and some must approve the change before it happens. In the UK, for example, acquiring control of many firms authorised by the Financial Conduct Authority without its prior approval is a criminal offence.

Where a licence depends on the owner's personal qualification or registration, the business needs someone else who holds it before the owner leaves. Where it depends on a site, a move or a lease problem can put it at risk.

Loupe rates this a deal breaker until you have confirmed a clear route to keep trading from the day you take over. Once that route is confirmed, the risk usually becomes one of timing, which you can manage by making the licence, registration or approval a condition of completion (closing in the US). Loupe's valuation tool also reduces the multiple, by 10% at its starting settings, where the transfer of leases, licences or key contracts is uncertain. Rules differ by country, region and sector, so check with the regulator and take advice from a lawyer who knows the sector.

• The business operates in a regulated sector, but the listing does not mention licences, registrations or inspections.
• A licence is in the owner's personal name, or depends on the owner's qualifications.
• Licence conditions limit opening hours, capacity, locations or activities your plans rely on.
• Inspection reports show outstanding actions, warnings or poor ratings.
• A licence is due for renewal close to the expected completion date.
• The seller suggests you keep trading under their licence for a while after the sale.

• Which licences, permits, registrations and authorisations does the business hold, and in whose name?
• Which of them need notice to, or approval from, a regulator when the owner changes?
• Does any licence depend on your personal qualifications or on a named manager?
• When is each one due for renewal, and have any conditions or warnings been added?
• Have there been inspections, breaches or enforcement action in the last five years?
• How long does the regulator usually take to deal with a new application or a change of owner?

• Copies of every licence, permit, registration and authorisation, with conditions and expiry dates
• Recent inspection reports and any action plans agreed with inspectors
• Correspondence with regulators, including warnings, notices and complaints
• Evidence of the qualifications any licence relies on
• The regulator's published guidance on changes of ownership, and any pre-application advice received
• Details of any applications or renewals currently in progress