In this guide
- What “business takeover” means in Singapore
- How takeover prices are set
- The lease: usually the deciding factor
- Licences and permits rarely transfer
- Staff, customers and contracts
- Sole proprietorships, partnerships and companies
- GST and stamp duty on a takeover
- A public takeover listing or a confidential sale?
- Most takeovers are asset sales: the buyer takes over the business, not your company, unless you sell your shares.
- Licences such as SFA food shop licences cannot be transferred. The new owner applies in their own name.
- When a business is sold as a going concern, employees covered by the Employment Act move to the buyer automatically.
- The landlord’s consent to assign or renew the lease often decides whether a takeover happens at all. Check it first.
- A takeover fee based on renovation cost undervalues a profitable business. Price it on the profit it makes.
What “business takeover” means in Singapore
Owners and buyers in Singapore use “takeover” for any deal where someone steps into a running business. In practice it takes one of two forms.
| Asset takeover | Share sale | |
|---|---|---|
| What the buyer gets | The business: fit-out, equipment, stock, customer list, name, and the right to take over the premises | Your company, with everything it owns and owes |
| Who stays liable for the past | Mostly you or your company | The company, and so the buyer, subject to warranties |
| Licences and contracts | Usually re-applied for or moved across one by one | Stay with the company, unless they have change-of-control terms |
| Typical for | Single outlets, shops and sole proprietorships | Established companies, groups and regulated businesses |
Small shops, cafes, salons and single-outlet businesses usually change hands as asset takeovers. Larger and regulated businesses are more often sold as share sales. Our guide to deal structures covers the trade-offs in more detail.
How takeover prices are set
Many takeover listings quote a “takeover fee” based on what the owner spent on renovation and equipment, plus something for goodwill. That works for a business that barely breaks even, where the buyer is really paying for a fitted-out unit.
For a business that makes a real profit, it undervalues what you built. Buyers of profitable businesses pay for the earnings, not the fittings. They work from normalised EBITDA, the profit after paying a manager to do your job at a market rate, and apply a multiple:
- Smaller owner-run businesses are usually priced at about 1x to 3x the owner’s earnings.
- Businesses earning roughly S$0.3m to S$3m of normalised EBITDA typically sell for about 2x to 5x.
Our valuation calculator gives an indicative range in two minutes, and the guide to how SMEs are valued explains the method.
The lease: usually the deciding factor
For most takeovers, the premises matter as much as the business. Before you advertise or agree a price, find out where you stand with the landlord.
- Assignment or a new lease. Most commercial leases need the landlord’s written consent to assign. Some landlords prefer to grant the buyer a new lease on new terms.
- Time left on the lease. Buyers discount heavily for a lease with less than about two years to run, or with no option to renew.
- Reinstatement. Check who must restore the unit at the end of the lease. A buyer will not take on that cost without reflecting it in the price.
- Deposit. Agree whether your security deposit is refunded to you and replaced by the buyer, or transferred with an adjustment to the price.
A landlord who will not consent can stop a takeover outright, so speak to them, or have your adviser speak to them, before a buyer is told the price.
Licences and permits rarely transfer
Many licences are issued to a person or a company, not to the premises, and cannot be handed over.
- Food shops. The Singapore Food Agency’s food retail licences are not transferable. The new owner applies in their own name and can operate only once the new licence is approved.
- Liquor, healthcare and other regulated licences. These are generally tied to the licensee, so a change of owner usually needs a new application or the regulator’s approval. Check each one with the agency concerned.
- Share sales. If the buyer takes over your company, its licences usually stay with it, but some regulators must be told about a change of control.
List every licence the business relies on, and agree in the contract who applies for what and what happens if a licence is refused.
Staff, customers and contracts
Under section 18A of the Employment Act, when a business is transferred as a going concern, the employment of staff covered by the Act moves to the buyer automatically, on the same terms and with continuous service. You must inform and consult the affected staff before the transfer. Staff not covered by the Act need new contracts with the buyer. A sale of shares, or a sale of assets alone, does not trigger section 18A.
Also agree how to deal with:
- Prepaid packages and deposits. Gyms, salons, clinics and caterers often hold customer prepayments. The buyer will either take them on with a price reduction or ask you to settle them.
- Supplier and service contracts. These are usually moved to the buyer by agreement with each supplier.
- Leave and other staff liabilities built up before the takeover, and who pays for them.
Sole proprietorships, partnerships and companies
A sole proprietorship or partnership has no legal identity separate from its owners, so it cannot be sold as an entity. The buyer takes over the business and its assets and registers their own business, and you cease yours and settle the tax for your period of ownership.
A company gives you a choice: sell the business and assets, or sell your shares. A share sale is often simpler for the business, because staff, contracts and many licences stay where they are. The buyer will then want warranties and due diligence on the company’s history. See our due diligence checklist.
GST and stamp duty on a takeover
- GST. If you are GST-registered and sell the business as a going concern, the transfer can fall outside GST, provided IRAS’s conditions are met: the buyer takes over a business, continues the same kind of business, and any part sold can run on its own. Otherwise GST may be due on the assets.
- Stamp duty. In Singapore, stamp duty applies to shares and to property, not to equipment or goodwill. A share transfer attracts stamp duty, normally paid by the buyer. Taking over a lease or property can also attract duty.
Our guide to tax and stamp duty when selling a business has worked examples. Confirm the position for your deal with a tax adviser.
A public takeover listing or a confidential sale?
Takeover listings that show the business name, photos or address reach many buyers quickly, and they suit a small shop priced on its fittings. They also tell your staff, your landlord, your customers and your competitors that the business is for sale, often months before you find a buyer, and they draw a lot of low offers.
For an established, profitable business, usually one with S$1m or more in revenue, a confidential approach tends to protect both the business and the price. The business is presented without its name, identifying details go only to qualified buyers under NDA, and price discussions start from the profit the business makes. If that is your position, a written valuation is a sensible first step.
Questions owners ask
What is a takeover fee in Singapore?
A takeover fee is the price a buyer pays to take over a running business, usually its fit-out, equipment, stock, name and the right to take over the premises. Owners often base it on what they spent on renovation, plus an amount for goodwill. For a profitable business, a price based on maintainable profit is usually higher and easier to defend.
Can I transfer my food shop licence to the new owner?
No. Singapore Food Agency food retail licences are not transferable. The new owner must apply for a licence in their own name and can start operating only once it is approved, so build the application time into the takeover date.
Do my employees transfer to the buyer in a takeover?
If the business is transferred as a going concern, staff covered by the Employment Act move to the buyer automatically under section 18A, on the same terms and with continuous service. You must inform and consult them first. Staff not covered by the Act need new contracts. A share sale does not change the employer at all.
Do I need my landlord’s permission for a takeover?
Almost always. Most commercial leases require the landlord’s written consent to assign the lease to a new tenant, and some landlords insist on a new lease instead. Speak to the landlord early, because a refusal can stop the takeover.