Selling Your Business

Selling a business can be a time-consuming, emotional and stressful process. We’ve compiled the following tips to help you prepare:

1) Get organized. Compile your key documents and maintain them in a fashion that is easily accessible. Key documents include: financial statements and tax returns for the previous three years, contracts and agreements with vendors and customers, board resolutions, copies of leases, licenses, and insurance policies, lists of tangible assets and lists of intellectual property. We recommend maintaining copies of these key documents on a secure electronic platform that enables you to grant your advisers and potential buyers access to the key documents as they perform due diligence.

2) Protect Your Information. During the sale process, you will reveal sensitive information about your business to advisers and to potential buyers, some of whom could be your competitors. Make certain that each of your advisers and each potential buyer is bound by a confidentiality agreement and non-disclosure agreement. If you need assistance in preparing a customized confidentiality and/or non-disclosure agreement, contact us. Although a confidentiality agreement will not guarantee that sensitive information about your business is never exploited, it will send a message to your advisers and potential purchasers that you value your business information and that you are serious about protecting it. You can also take precautions to limit disclosure of sensitive information by requiring potential buyers to make good faith deposit and offer before releasing your most sensitive information.

3) Don’t ignore taxes. Tax planning is a crucial part of structuring an effective business sale strategy. Talk with your accountant or tax adviser about the recognition of gains from the sale to determine the optimal timing for sale proceeds. For example, you may determine that it is optimal for your tax planning needs to accept a promissory note instead of cash for a portion of the purchase price to minimize the immediate tax impact of the sale. In the context of an asset sale, you will also need to consider the tax effect of the allocation of the purchase price to the purchased assets.

4) Be flexible. Determining an appropriate purchase price and negotiating payment terms with a potential buyer is an art, not a science. You can often generate more value for yourself over the long-term by being flexible in negotiations than a more rigid approach.  Rely on your legal and financial advisers to assist you in evaluating appropriate sale structures and maximizing realized value for your business.

5) Use good legal counsel. You’ve spent a lot of time developing and growing your business. You should engage legal counsel that will protect your interests and help you realize the full value of your business as a going concern. Feel free to contact us for assistance as you prepare for the sale of your business.