Working with owners before and during a sale, we find ourselves giving the same advice again and again. It is not a list we keep handy; the same ideas keep coming up and lend themselves to consistent counsel. One overarching truth: selling your company is like a second job. There is a great deal to do, gathering diligence, reviewing marketing materials, meeting buyers, and owners routinely underestimate the time and mind share it consumes. Here is the advice we give most often during Phase I.
Get tax advice early
It is not what you make, it is what you keep. The after-tax proceeds matter more than the headline price. Early tax advice helps identify the enterprise value needed to hit after-tax objectives, whether a stock or asset deal is preferable, traps like depreciation recapture, and structuring requirements that are not otherwise obvious.
Hire a deal team that does deals
No one hires an electrician to fix a leaky pipe. Assemble advisors who routinely handle transactions like yours. This can be sensitive if you have been loyal to generalist advisors for years, but adding transaction attorneys and accountants improves both the outcome and the odds of closing.
Employees have sensitive radar for changes in your habits
Staff notice changes in routine and tend to assume the worst. A normally open office door now closed, unfamiliar visitors arriving more often, plant tours for guests when that is unusual, or the owner out of the office more than normal, all of it gets noticed. Be mindful of the signals you send.
Run the company as if you are not going to sell it
A sale is long and complex, and any number of things can derail it. If updating the website, buying a machine, or hiring someone is the right move regardless of a sale, it is the right move during the sale too.
Do not cross over as if you have already sold
Many deals do not close, so keep acting like an owner. That mindset preserves your ability to make the hard call to end a process that is going badly. Crossing over can lead to an inferior deal, because a buyer who senses you have mentally moved on may press the advantage.
An NDA will not protect you from an unscrupulous buyer
NDAs are a formality that put buyers on notice not to disclose or benefit from what they learn. An unscrupulous buyer may sign one just to gather intelligence, and enforcement can come down to who has deeper pockets. The real protection is knowing the buyer and their ethics before sharing sensitive information.
Be comfortable with everything you disclose
Early on, err toward under-disclosing; you can always share more as a buyer's seriousness is confirmed. That said, buyers need certain threshold facts, customer concentration, vendor issues, employee matters, to make an informed offer, and disclosing them too late can trigger a renegotiation.
Under-promise and over-deliver on estimates and projections
Everyone likes good news, and consistently beating projections builds a buyer's confidence and trust. Consistently missing them does the opposite: the buyer discounts your numbers and loses faith in the owner.
None of this is earth-shattering, but it helps owners think through the parts of a transaction that contribute to a successful close, or at least avoid damaging the company if a process fails. Continue with Part Two and Part Three, which cover the advice we give as a deal moves into Phases II through IV.
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