SELLING PRIVATELY HELD BUSINESSES


–SINCE 1982–

Articles & News

For Sellers – Going to Market Without a Price

Although we value every business, we may have a conversation with our sell side clients about the advisability of going to market without a price, which is confusing to some buyers and some sellers.  With the goal of eliminating some of that confusion, we believe it is appropriate to explain the thought process we go through when advising our clients. In most cases, the decision is fairly simple, as in discerning black from white.  It is the middle portion of the spectrum, with the multiple shades of gray, where the decision becomes more challenging.  For smaller, less complex businesses with

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Why it is Important to Pay Attention to Your Balance Sheet When Selling Your Business

I am currently involved with one of our associates in negotiating the sale of one our client’s companies. It is a desirable, growing business that attracted five offers from a diverse group of acquirers. Three of them are strategic industry buyers, one is a strategic buyer from a complementary industry, and one high net worth individual. Like many lower middle market transactions, the transaction was structured as an asset acquisition, rather than a stock sale. To facilitate a presentation to our client, my team prepared a spread sheet, comparing the proposals on an “apples to apples” basis. On their face, most of the

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Understanding the Difference Between a Stock Sale and An Asset Sale

There are two primary ways to structure the sale of a business; an asset sale or a stock sale. Although, many potential business buyers and sellers do not have a good understanding of the differences between a stock and an asset sale, the format of the structure can have significant tax and liability ramifications. In a stock sale, the buyer buys all or a portion of the outstanding stock of the target business. As a result of the transaction, the buyer receives all of assets, including cash, of the selling company. The buyer also gets all of the liabilities, known and

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Going to Market Without a Price

As is typical at this time of year, we are seeing a significant amount of transaction activity.  Not only are we receiving year-end financial data from existing clients, but potential clients are providing information relative to valuation in anticipation of going to market.  Because valuations are front and center covering a significant portion of the surface area of my desk, I thought that an appropriate topic for this month’s article should at least be somewhat tangential to valuations. Although we value every business that we represent, we may have a conversation with our sell side clients about the advisability of going to market

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Having Your “Legal Ducks” in a Row Before Sale

By Kevin M. Forbush, J.D., CPA, Forbush Legal Offices, P.C. In many endeavors in life, good outcomes depend on good planning.  From securing a happy family vacation to ensuring you have enough money for retirement, good planning is key.  Not surprisingly, the same is true for a successful, profitable business sale – planning is key.  Remember, proaction is always better than reaction. Though most agree in principle that planning is important, many business owners often fail to plan for the sale of their businesses.  Not surprisingly, these people then end up not being able to sell, sell for much less than

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Training/Transition After the Sale

We are often asked by business owners considering the sale of their businesses, what is an appropriate length of time to remain involved with the business for a training/transition period.   Although there are many factors that come into play, as I will address below, the real answer is, “It depends.”   We often break the training/transition period into three categories: short, medium, and long. For short-term transitions, we usually see a fairly straight forward business, a buyer with industry experience, and/or a strong second-level management team in place.  In this type, often the transition consists of introductions to key customers,

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What is “Due Dilligence”?

Due Diligence – Making Sure Everything Is Above Board Due diligence is the process that a buyer and his advisors use to verify the accuracy of the representations of a seller and the suitability of the business for an acquisition.  Depending on the transaction, there can be numerous components of the transaction that undergo scrutiny, including financial, legal, intellectual property, technology, etc.  For our purposes, I will address the financial and legal aspects of due diligence, as they are common to virtually every transaction. Financial due diligence is usually conducted by an accounting firm retained by the buyer to verify

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Employee Issues Involved With a Business Transfer

For most businesses, employees are the key asset being acquired, and the majority of buyers retain all or the vast majority of the employees.  Of course, the employees will need to demonstrate their value to the buyer.  When we advise sellers and buyers, we suggest that the transition to new ownership be as minimally disruptive as possible to the employees.  By that, we mean not changing pay scales, benefit packages, or vacation policies.  In fact, one of the best ways for the buyer to ensure employee retention is to increase the benefits package.  For example, we sold a business with

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Insurance Issues Involved In Business Transfers

Property and Casualty (“P&C”) – In addition to the general need for insurance coverage for loss protection, most transactions involve financing, with the business’ assets being used as collateral.   Prior to closing, the lender will require proof, in the form of a certificate, that the lender is named as an additional insured on a policy with sufficient coverage amounts.  If a lease is involved in the transfer, the Landlord will also require appropriate insurance protection.  Often times, the Seller’s existing insurance agent is the most efficient source for coverage, as the agent is familiar with the business and the facility. Health

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Preventing Legal Deal Killers

By Julian Izbiky, Izbiky & Associates, Attorneys At Law A legal deal killer is a legal issue that causes a purchaser to walk away from a deal.  A business owner can take steps in advance of a transaction to prevent a legal deal killer from occurring. Employee Issues Having key employees is a critical value driver for a business.  But what happens when the key employee says that he won’t work for the prospective purchaser and that, if the business is sold to the prospective purchaser, he will quit and start a competing business?  I once saw this exact situation

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