Planning for an exit via the sale of your company can be simple or complex, depending on the condition of the company. Prior to entering into an exclusive agreement to sell the company, we perform an overall assessment of the strengths and weaknesses. The ultimate outcome is to maximize enterprise value and seller friendly deal terms.
Our role in Exit Planning can involve the following:
- Define Objectives: Establish clear objectives for the sale, including the needs and desires of the seller(s).
- Financial Preparation: Analyze prior and current financial statements for inconsistencies or issues.
- EDITDA Adjustments: Perform adjustments to the trailing 12-month financials. These may include eliminating extraordinary (one-time) revenues or expenses. Also, supporting add-backs to establish the proper EBITDA, by removing non-business expenses from the P&L Statement.
- Working Capital: Assess the appropriate working capital for the business.
- Business Valuation: Perform a through business valuation: identify potential improvements from additional revenue streams; operating efficiencies; product/service gross and profit margins; stronger customer relations; and, valuable IP not on the Balance Sheet.
- Market Comparables: Analyze market sales of comparable companies to ascertain a reasonable multiple range to apply against adjusted EBITDA.
- Due Diligence: Organize a comprehensive due diligence program and data room for buyer prospects.
- Coordinate Professionals: Coordinate the various professionals, such as attorneys, accountants, consultants, etc., who should participate and how.
- Legal and Regulatory Compliance: Ensure your company is in compliance with all legal and regulatory requirements. Address any outstanding legal issues or litigation, contracts, or liabilities that could affect the sale process.
- Negotiation Strategy: Develop a negotiation strategy to achieve favorable terms in the Purchase and Sale Agreement. Consider factors such as price, payment structure, employee retention, intellectual property rights, and post-sale involvement.
- Tax Planning: Work with tax advisors to optimize the tax implications of the sale. Explore strategies to structure the deal to minimize taxes, such as stock contributions to a CRT (Charitable Remainder Trust).
- Customers and Vendors: Provide the agreements with these third parties. In addition, to avoid customer concentration issues, provide the rationale for valuable customer relationships, as well as special vendor pricing.
- Insurance: Ensure that all types of insurance coverage is included and in place, such as property and casualty, general liability, cyber security, etc.
- Real Estate: Any lease agreements should be current and assumable. If property is rented from the owner(s), market rent should be determined. Conversely, determine if the property will be included in the sale.
- Capitalization: Ensure that the capitalization table is updated, and outstanding options and warrants are clearly defined. Any stock purchase agreements should also be noted.
- Employees: Details should be available for any contractual agreements, including compensation, pension, profit-sharing, retirement or other employee benefit plans. In addition, clear delineations of roles within an organization chart should be available.
- Wealth Management and Estate Planning: Engage a wealth advisor early on, prior to a sale of the company, primarily to minimize taxes and ensure financial security.