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Plan ahead to sell, merge, or buy a business

Posted by Michael Horn on Fri, Nov 14, 2014 @ 10:54 AM

Leslie Johnson, a contributing writer for the Atlanta Business Chronicle, offers some great advice on buying or selling a business in the article below. In class we discuss these options. Leslie make some great points that veteran entrepreneurs should follow. Planning is a strength of most veterans. Vets need to put this skill to use when you are buying a business.

Leslie Johnson writes - Buying or selling a business may not be as easy as 1, 2, 3, but following certain steps and recognizing trends can make things go a bit smoother, especially now, with merger and acquisition activity picking up for companies of many sizes.

"At least for me, 2014 has been a more active year than the last few years," said Louann Bronstein, member at Stites & Harbison PLLC. "It's been significantly more active for the last few years and it's been a variety transactions."

"There's just a lot of dollars still available to make acquisitions," said Lindsey Sykes, a partner and the service line leader for Bennett Thrasher LLP's financial reporting and assurance department.

Bronstein said she sees a lot of deals built on established relationships.

"Through working existing connections, the deals are getting done, as opposed to, 'I want to sell my business I want to go get an investment banker,'" she said. "The business people are putting these things together through their connections."

But when a seller does go with an investment banker, a good one "knows all the buyers," can put together a nice brochure about the company, and is part of a team that helps the entrepreneur stay focused on running the organization, said Rhys Wilson, partner and co-leader, mergers and acquisitions, at Nelson Mullins Riley & Scarborough LLP. "Deals are incredibly distracting to the seller. It's critical that the company keep performing."

Compared to more than a decade ago, Bronstein said there are a lot more "moving parts" to transactions these days, as well as more interest from far and wide.

"When I started 15 years ago, either a business broker of investment banker came to you and said, this client's doing this deal, a U.S. purchaser is buying a U.S. company. All these have some sort of twist due to a foreign component."

With transactions on the upswing, experts say more businesses would be wise to put their houses in order as neatly and efficiently as they can, pre-sale or pre-purchase. "The single biggest thing that sellers need to do is, they need to be very clear about what their goals are in the transaction," Wilson said.

Often, he said, things unfold akin to this scenario: You're sitting in your living room when someone knocks on the door and expresses interest in buying your house.

"That's how a lot of deals happen," Wilson said.

But sellers should ask questions, such as, "What are my goals for this transaction? Who is the right partner?"

After determining goals, "Go out and get a really good investment banker who knows all the buyers," Wilson said.

Sellers should also clean up any wage and hour issues, including how people are classified, for example. For buyers, there are considerations during and after a transaction — whether a sale or a merger.

"They're really the same thing," Sykes said. "A merger is just going to be the sale of stock. A sale is usually the sale of assets."

Preparing for a business sale

1. Establish relationships with appropriate professionals, such as investment bankers, lawyers, accountants.

2. Get the house in order

a. Gather reliable financial information, at least two years and trailing 12 months.

b. Document customer relationships, ideally through contracts.

c. Document ownership of the business.

3. Focus on the business. Don't get distracted.

Source: Lindsey Sykes, Bennett Thrasher LLP

Topics: Veteran, Vets, Entrepreneurship, Small Business, Buying