MERGERS & ACQUISITIONS: The “Triple A” Approach to Selling Your Business
We’ve advised you to ignore unsolicited overtures from interested parties. We’ve convinced you now is an opportune time to sell your business. What’s the next step? Surrounding yourself with talented professionals in the following areas of expertise: law, accounting, and financial advisory/investment banking.
As you enter the realm of M&A, the attorneys and accountants you need are considered transactional attorneys and accountants with transaction experience. On the advisor side, you want a seasoned M&A firm that has deep transactional experience and preferably one who has experience in the highly idiosyncratic LBM sector. Here’s what you should look for:
Attorneys. The central goals of a good transactional attorney should be to:
• Take risk out of the deal.
• Advise you on what is a reasonable request from a buyer and/or what is unacceptable and out of bounds.
• Act as an accelerant, not a hindrance, to the sale process. There’s a lot of risk in legal documents; dealmakers know they can make or lose a lot of money in the legal details. Take “representations and warranties” for example. These statements about the health of your business which you make as a seller in a deal can doom a deal. Other potential traps loom, such as site environmental liability, hold-backs, and escrow accounts are all typical items that a transactional attorney should handle with fluidity, confidence, and assured ease. Further, a great transaction attorney will increase the likelihood a transaction closes, and will be prepared to turn versions of the letters of intent, purchase agreement documents and buyer-seller questions in short order. This urgency, to get to a final purchase agreement and close the deal before the parties “cool” or market circumstances change, is a talent you want on your side.
Accountants. Are your financial statements reported in accordance with GAAP accounting? Would a stock sale or an asset sale return more for my shareholders? Do you know how much Obamacare taxes the sale of your business? These are the types of questions your accountant should be able to answer with authority.
For those of you who don’t do reviews or audits: Buyers want your books normalized to Generally Accepted Accounting Principles (“GAAP”). GAAP compliance is typically not a task a bookkeeper can handle if your company doesn’t perform annual reviewed/audited financial statements. Your accountant should be able to clarify exactly what adjustments to earnings need to be made to bring your books into compliance.