A Primer on Selling Your Business--12 Tips for Maximizing Value
54898
Reference & Education > Legal
Nov 16, 2007
robertmasudesq
A Primer on Selling Your Business--12 Tips for Maximizing Value
When selling a business, the seller will naturally try to increase the company's value and reduce its post closing risks or losses. These need to be accomplished, of course, without causing any disruption to current operations. Before putting the business up for sale, the seller must first identify areas of concern. This way the seller will be well-prepared to deal with term sheets and letters of intent, negotiating the terms of the sale, and addressing the issues that may arise during the sales transaction. If a seller fails to address pre-sale planning considerations, it is very likely that the outcome will be unsuccessful. In order to increase a company's value and achieve a successful sale, sellers should be mindful of these considerations: 1. Organize Corporate Records: sellers must anticipate that the buyer will be interested in the company's corporate records. Due diligence disclosures that are anticipated must be updated and reviewed. These records should include key corporate, financial, accounting and operational records as well as all legal documents. 2. Show Company Growth: sellers must be able to confirm the historical as well as projected company growth, both for the short-term and long-term. This can be done by preparing a financial model that covers acquisition opportunities displayed on a time-line basis. 3. Explain Company Performance: sellers must be prepared to defend the financial performance of the company, explaining in detail any fluctuations in profit, operational expenses, selling costs and other overhead expenses including salaries and material. 4. Describe Return on Investment: sellers must help the buyer confirm its company valuation by showing detailed reports on return on investments for every item classified as capital expenditure, together with an anticipated time frame. 5. Highlight the Management Team: if the buyer is considering making an investment in the existing management team, sellers must make sure that they will highlight the manager's experience and contribution to the company. Also, providing the buyer with a detailed assessment of the low-level managers who can be considered assets should also be performed. 6. Operate the Company: although the sales process will consume much of the senior managers' time and efforts, operations must never be disrupted. The senior management should not forget to continue to meet their business goals and targets during this period. 7. Enter Into a Confidentiality/Non-Disclosure Agreement: sellers must not forget to enter into a non-disclosure and confidentiality agreement with all potential buyers in order to protect the proprietary company information which may be shared during the course of sales negotiations. 8. Negotiate the Terms of a Letter of Intent: sellers should negotiate the terms of the sales and make sure that they are properly reflected in the Letter of Intent. This should include ancillary provisions, material economic terms, payment arrangements, limitations or restrictions on the indemnification obligations, extent and nature of warranties and representations and the period for the buyer's right to perform. By preparing a detailed Letter of Intent, sellers and buyers can be assured that they both agree on important business points, respective obligations and legal terms before finalizing the sales documents. This will help them avoid delays and additional sales transaction costs. 9. Employee Incentives: the awareness of an impending sale might result in making the employees anxious. In order to avoid any negative effects on day-to-day operations and potential harm to the planned sales transaction, it is important that sellers give their employees incentives. These incentives can be in the form of bonuses, benefits, and perhaps even equity participation. 10. Select an Investment Banker: the services provided by an experienced investment banker might come in handy for sellers. These services include identifying financial and strategic buyers, gathering realistic information pertaining to the valuation of the company and obtaining data on market intelligence. Sellers should consider factors such as experience, reputation and professionalism when looking for an investment banker. 11. Obtain Accounting, Financial and Tax Advisors: sellers should have accounting and tax advisors that will review and analyze all considerations during the sales transactions in order to foresee possible problems and eliminate them as early as possible. 12. Obtain Sarbanes-Oxley Act Counsel: sellers must seek counsel who are expert in the Sarbanes-Oxley Act. Also known as the Public Company Accounting Reform and Investor Protection Act of 2002, this legislation covers requirements that may be important to the acquisition of the company. If the seller targets compliancy to this Act, company valuation will improve.
Robert Masud, Esq. is the principal of Masud & Company LLC, a law firm for the world of business, finance and the internet. Find out how our lawyers can help you at http://www.masudco.com.
send email to robertmasudesq
Write a Review
Add to My Favorite
Refer it to Friend
Report Article
Other links at Reference & Education > Legal
Throughout America, the number of nursing home negligence stories continues to rise at an alarming rate.
Category:
Finding an honest lemon law lawyer is a tough challenge. To find a specialist attorney contact your state's attorney general's office. They have up-to-date information on honest, hardworking lemon law attorneys who can get the job done.
Category:
We've recently heard on the news about the aggressive debt collection tactics from so called not for profit hospitals and doctors. The lengths they have resorted to, the lies, the tactics are unbelievable. Something needs to be done.
Category:
A registry of criminals doesn?t exist. It would be wonderful if it did. Anytime you wted to learn more about the new neighbor that acts so creepy or the guy at work that keeps bugging you for a date you could just scroll down the list for their name
Category:
The word antitrust was first widely used when the US government began drafting policies to fight the creation of business trusts. More known today as cartels, trusts tend to promote unfair corporate practices and monopolies.
Category:
Site Sponsor
Directory Statistics
Articles: 68285
Categories: 501
Yahoo Entertainment
