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Not "To-Do's" when selling

BACKGROUND
An owner decides to retire and sell the business with $20 million of annual revenues. The company owns some locations and leases other locations utilizing the owners' entity. The business is profitable.

IMMEDIATE PROBLEMS
At the initial meeting the following items quickly became issues.

  1. Confidentiality: The owner had not planned to bring the CFO into his confidence by implementing a "stay" agreement. With all the ensuing financial updates and analysis, it would be impossible to expect the selling process to be achieved through due diligence without informing the financial offers of the imminent company sale.

    The logical potential buyers would be local competitors, which would sign a non-disclosure but there would be no assurance that there would not be a leak. The owner intended to talk to interested acquirers one at a time, thus prolonging the process and increasing the likelihood of a confidentiality leak.
  2. LOI (Letter of Intent): The LOI, which the Seller provided, was incomplete and did not require a significant retainer.  
  3. Transaction Attorney: The proposed Seller’s attorney had no experience in business transactions.
  4. Financial and Business Information: The financials and information regarding the business were incomplete and unprofessional making it difficult to get a true picture of the business, which will result in lower offers or no offer.
  5. Lawsuit: The owner wanted to bury a law suit in the fine print.

 

Summary
Many business owners do not appreciate either the complexities of doing a deal or appreciate the benefits of hiring a first-class team (Attorney, CPA and Intermediary) to conduct the sale process. The initial effort is well worth the back-end reward. Watch out for inexperienced dealmakers, they can ruin deals.

Enjoy the Holidays!

Steve Sink, CBI, M&AMI

ss@phxaffiliates.com

 

 

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