As the economy improves, industry experts are forecasting a pick-up in the pace of mergers and acquisitions. If you’ve been thinking of selling your company, now is a good time to assess the situation and position yourself to take advantage of opportunities as they unfold. Here are some tips to help you get organized.

  • Analyze the financial consequences

The sale of a company can result in a significant change in the mix and liquidity of your personal wealth. Since your business may be your principal asset, it’s important to reevaluate your estate plan with an eye toward your wealth-transfer goals and related tax issues. You may want to consider various forms of charitable giving—establishing a family foundation, setting up a charitable remainder trust or charitable remainder annuity trust, or starting your own fund within a community foundation, for example. Making gifts of voting or nonvoting economic business interests to family members is another means of transferring and preserving wealth, and reducing your tax burden.

  • Talk to your advisors

Before you pursue a sale, assemble a team of advisors to include key members of your company’s management, as well as experienced merger-and-acquisition legal counsel, accountants, and investment bankers. A qualified investment banking firm or accountant with experience in your industry can identify areas that may improve your valuation and facilitate the sales process.

While your in-house counsel and accountants will serve important roles in the sale process, outside advisors are key to positioning your company for sale, as well as negotiating, documenting, and seeing you through to a successful transaction.

  • Develop a marketing plan

Utilize your team to develop a focused marketing plan that identifies targeted buyers, sets a timetable, and creates a framework for the sale and transfer process. Your marketing might include an offering memorandum and a form of acquisition agreement. Plans should be flexible enough to respond to changing market conditions and emerging opportunities.

  • Consider incentives

Pay-to-stay arrangements, options, equity interests, and other incentives are commonly used to encourage management and employees to remain through the sales process. These arrangements are usually taken into account in setting your company’s purchase price. Keep in mind, the benefits of retaining a loyal, committed management team through the successful sale of your business will likely outweigh the additional cost.

  • Do your homework

Putting yourself in a buyer’s shoes will help you identify your company’s strengths as well as its challenges. Experienced merger and acquisition advisors can offer needed objectivity and help you see your company from a buyer’s perspective. Ask: What potential synergies or cost savings might a buyer realize? Effective accounting systems and controls in place? Corporate documents updated? Should you revise any transfer restrictions, buy-sell arrangements, or voting agreements before you offer the company for sale? Are all patents, copyrights, trademarks, non-compete covenants, and other intellectual property matters documented and enforceable? Is an environmental study needed? What about title insurance, land surveys, or lien searches? What is the status of your material contracts, licenses, and permits? Identifying and addressing thorny issues in advance will pay off in the end.

  • Organize your data

Consider organizing, labeling, and assembling all documents in one convenient place—on site or at an advisor’s office—to facilitate a buyer’s diligence investigations. Also determine which documents, if any, a buyer will be allowed to copy and remove from your data room, and make certain to have all prospective buyers sign a carefully drafted confidentiality agreement before accessing your company’s information.

  • Develop a sales strategy

Setting your purchase price is only the starting point. Other material features of a purchase agreement (representations, warranties, and indemnification provisions, for example) can have significant economic implications on your transaction. Your advisors can help you develop an effective negotiation strategy.

 

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.