You’ve built a nice business, congratulations.
Now you’re ready to sell. Would you like to receive the full value for your business, or would you rather just get 60-80% of the value?
Stupid question, right? Not really.
Please allow me to let you in on a secret … entrepreneurs are typically horrible at getting their business ready for sale!!
Don’t believe me? Ask M&A attorneys who get the call from their client that they want to sell, and would like the process completed in 4 months and want to maximize value in an all cash sale.
I can’t tell you how many times we’ve talked with a CEO/Owner and they want to start the process today. Sometimes they tell their lawyers. Sometimes their accountants. But more times than not, owners who want to sell start with the assumption that the business is ready for sale … and even worse, that the CEO is really ready to sell the business.
Let’s ask a few very basic questions:
Is the corporate structure ready for a transaction? We worked with one client for over a year, just to get the corporate structure in such a form that a transaction was possible. We obtained a great outcome, but front end work had to be done or there was no transaction to be had.
Are you planning to sell assets or stock in your business? What difference does it make?
What about tax strategy? Use of trusts?
Would you like to pass along some of the proceeds of the sale to future generations? Perhaps you’d like to defer a lot of tax?
Some of the best planning must be done a MINIMUM of six months before starting a sale process. You can thank the IRS for that fact. The planning process itself might take another 3-6 months, so you will need to start planing for the sale one year before the process to sell the business begins.
Selling a business is so much more complicated than calling your broker to sell a stock on the NYSE. There are tons of issues to be considered, from legal structure, tax structure, implications of an asset sale vs. a stock sale, employees, minority shareholders, etc. The list goes on and on.
The whole process begins with understanding what our client is truly wanting to achieve.
Want to maximize price, or maximize after tax cash? You’d be surprised how often entrepreneurs want the higher price without regard to taxes, and without taking the time to structure the company in such a way to save a lot of taxes on the sale.
Want to retire, or stay with the business? Sell all your stock, or just a portion? Is there debt in the company? What are those terms on a change of control? Other contracts with change of control provisions?
A little planning before putting a company on the market for a sale may be the best and most profitable time you’ve ever spent. Let’s start by understanding your wants, desires & needs and then crafting a strategy that we can execute together.