Confidentiality is probably one of the key concerns for our clients
Selling a business is a complex event that many owners have not gone through before so the use of an experienced advisor can be of great value because of their knowledge of dealing with the many issues that can come up. In the months before the sale, an owner’s energy should be focused on the preparation of the business for sale. It is important to fine tune the business to improve profitability and internal systems and thus the investment case for a future investor.
It is also important to consult your accountants early on as the structure of a transaction can significantly affect an owner’s tax liability and you may need ample time to implement the most advantageous structure. Issues to consider include: the best use of your lifetime capital gains tax exemption and the criteria the company must meet to be considered a qualified business corporation so that it qualifies for the capital gains exemption; the possibility of deferring your tax liability; allocation of the purchase price to various assets.
The Process we follow to Sell a Business.
Step 1 – Price the Business
A realistic valuation of your business is the starting point. Our valuation is based on the financial analysis of the business and current market conditions (particular to your industry). This is used to justify the price of the business to buyers and their advisors (and to assist the Purchaser’s bank when it comes to financing the acquisition).
Step 2 – Market the Business
We actively market businesses in a confidential and controlled manner. We prepare all the relevant information in a format that clearly explains the business. As you only really have one chance to make a good first impression with buyers we find that the more comprehensive and thorough the material the better. We analyze the market that you operate in, your customer base, your competition, human resources, future growth potential and we present all of this and your business in the best possible light.
Marketing a business requires careful thought and planning. We approach individual, strategic and financial buyers, private equity groups and other intermediaries looking to buy businesses for their clients. We screen the buyers to avoid wasting time working with unqualified buyers and try to quickly establish that a buyer meets an appropriate level of expertise and has the financial ability to proceed. All buyers execute a binding Non-Disclosure Agreement. We work closely with them until we have established a genuine interest in proceeding with the acquisition. We arrange all appropriate meetings and work with both buyer and seller to ensure a successful transaction based on a clear undertanding and agreement of all the issues involved.
Confidentiality, for our clients, is one of the most important elements that must be considered during the sale process. The wrong information leaks at any time can harm the business, either competitively or at the relationship level with employees, suppliers and customers. Once the sale process has begun, control of information related to, or that could be perceived as indicative of, a sale must be carefully controlled.
Step 3 – Negotiate Terms
Awareness of financing options, tax, legal and employee issues and creative solutions to them are crucial. We help negotiate the terms of a deal which all parties and their advisors will work towards. Being aware of and overcoming the obstacles to find an agreeable and fair deal is a key role we play. Issues related to employees, working capital, holdbacks, earn-outs, non-competition, training and transition must all be clearly dealt with and managed.
Step 4 – Close the Deal
We help manage the due-diligence process in order to conclude the transaction. From our experience we know and can anticipate what information a buyer will likely request to validate the legal and financial condition of a company. We work with our clients to compile and present this data so that there are no surprises at this stage. Due-diligence involves the increased presence of advisors who introduce new perspectives. The need to maintain momentum at this stage is crucial and is another key role we play in the process.
Developing an exit plan for a business owner and then selling the company is a hands-on, time intensive project requiring a great deal of communication, collaboration and interaction – as a result it is much better to work with a broker that you feel fully understands your business and will represent it and you well.
Whatever stage your business is at a meeting with an advisor that has a good knowledge of current market conditions and who can suggest potential valuations of the business can provide an owner with valuable information.
Feel free to call us at 604.786.2046.