THE
BUSINESS OWNER
Realize Value of Business: Consideration of the
options in selling a business is one of the most challenging
analyses a business owner can make. At company maturity
or divestiture, the businesses equity has grown and
compounded, having been managed and risked many times
over. The owner has built the business, invested capital,
and invested entrepreneurial talent. At the exit stage,
the business may represent a significant percentage
of the owners' wealth.
Achieve Best Price: The owner's objective is to
generate the highest price for the business in the shortest
period of time. This requires positioning the business
for its highest and best use, so the buyer can justify
committing to full price. It also requires accessing
the widest pool of potential buyers.
Succession, Growth or Sale: The owner needs to assemble
the information necessary to make an informed decision
regarding further growth and development, continuing
to manage the business in the family, recruiting professional
management, or selling the business.
Tax Planning: There are numerous tax considerations
in structuring a sale or transfer of a business, and
each can have a significant impact on the net realization
of value to the seller. Alternative structures should
be considered.
Sale Proceeds/Reinvestment Risk: The structure
of the transaction and form of proceeds are equally
important to a successful sale. Careful planning and
analysis can positively impact the total return, and
can enhance the value of the proceeds after the sale.
Consider the quantifiable risk and higher yielding
income from seller held notes from the existing business.
Consider tax deferral through installment sales. Develop
an investment strategy to meet the seller's objectives.
CONSIDERATIONS
FOR A DYNAMIC EXIT PLAN
Take Control: This is a challenging time for the
business owner. When facing merger, acquisition, or
sale, major corporations mobilize high-level dedicated
teams and utilize sophisticated advisory services
to focus on the critical decisions, and to insure
that the decisions are executed properly. Don't let
events control destiny. With limited internal resources
that are otherwise committed to operating the business,
the owner must himself commit to working closely with
the team of outside advisors. This team is led by
your M&A advisory group, and includes the company's
accountants, lawyers and bankers.
Business Focus: Manage better than ever before.
The owner must enhance his ability to focus on the
business, and continue to manage the business for
maximum efficiency, profitability, and market franchise.
Make the business reflect its true value. By allowing
the advisors to manage the divestiture process, the
owner is free to do what he does best.
Owner's Responsibilities: In addition to managing
the business effectively, the owner must provide historical
results and documentation requested by the advisors.
This is the first inside contact the buyer will have
in most cases, and will establish the business image
and set the stage for future negotiations. The owner
must also be available to consider independent advice
and to work with the M&A professionals when evaluation
of alternatives is needed.
Decision Making: Work with the M&A advisory
team to evaluate the economic impact of differing
terms and competing offers.
Define Post Closing Role:
The seller should determine in advance his objectives
regarding his willingness to remain as a business
consultant, and the constraints of a non-compete clause.
It is important to be flexible, since a future role
in the business may have an impact on the viability
of the valuation.
