Blog written by Robert Champoux, RC Advisory Services
It is important that you form a team to assist you in the sale of your company. This will ensure that you not only get the greatest value but will also free you up to continue to operate the company during the sale process (Buyers will capitalize on reduced performance during the sale process by trying to reduce the price). While you may already have an attorney and a CPA, they may not have M&A transaction experience so it is important that you carefully select team members that provide appropriate advice.
- Attorney – Seller’s attorney (experienced in M&A transactions) Reviews and edits documents drafted by the buyer’s attorney.
- CPA – (Experienced in M&A transactions) key team member provides tax advice relative to deal structure: “it isn’t what the selling price it, it is what you deposit in the bank after the tax man takes his share”
- Financial Planner – In conjunction with CPA, looks at the long term needs of the seller and seeks to address some of the tradeoffs between cash up front, seller notes, etc.
- Management consultant if needed, assists in getting the company ready for sale
- M&A Intermediary – Manages the sale process and interfaces with the Seller, Attorneys, CPA, Financial Planner and Management Consultant. Markets the company, locates candidate buyers, negotiates deal points, and manages the entire sale process.
Get prepared and get smart!. Talk to your team and learn from them. Keep a notebook and write down questions about the various terms that come up in conversations. When a deal starts coming together it is important to be able to be a knowledgeable participant in the process.
Part IV Establish the value of the company. When considering the sale of a company (often an individual’s greatest asset), one should accurately know how much the company is worth, and not depend upon what someone else told them at a cocktail party based upon their “Multiple” of EBITDA. The value of a company is based on a large number of factors which are specific to each company. These include some or all of the following:
Industry
Customers
Customer Concentration
Products
Product Concentration
Employees
Employee Dependency
Employee History
Competition
Competitive Threats
Government regulations
Company History
Previous legal actions
Sales level and history
Capital Equipment (Assets) and Age
Capital Equipment Replacement requirements
Adjusted EBITDA
Bank lending practices
Seasonality of earnings
Sometimes a realistic opinion of value can be derived through discussions with your M&A Intermediary in conjunction with your CPA but sometimes it is worthwhile to obtain a formal valuation from a certified professional valuation professional. This process will not only provide an opinion of value but will provide you with the basis with which the “number” was derived as well as what changes would be required to improve the value in the future.
Seattle| Bellevue Business Lawyers/ Attorney | Equinox Business Law
