Selling a Business

New accounting rules may require that acquirers and acquiring companies report earnout agreements as liabilities. Joel Johnson, president of Orchard Partners Inc., in his article, “Earnouts,” published by Valuation Strategies, states: “In a given year, 2% – 3% of announced mergers and acquisition agreements involve earnouts.  These figures probably understate their prevalence.  Earnouts tend to […]

The following are situations where the price was not the deciding issue in the successful sell of a business. The ultimate buyer may be the only one who really understands the situation. A business intermediary really understands the issues and can lead the buyer and seller to a successful resolution. • One seller had 60 shareholders

Basically, there are three major negotiation methods. 1. Take it or leave it. A buyer makes an offer or a seller makes a counter-offer – both sides can let the “chips fall where they may.” 2. Split the difference. The buyer and seller, one or the other, or both, decide to split the difference between what the

Due diligence is generally considered an activity that takes place as part of the selling process. It might be wise to take a look at the business from a buyer’s perspective in performing due diligence as part of an annual review of the business.  Performing due diligence does two things: (1) It provides a valuable

A solid, factual and compelling offering memorandum maximizes the chances of not only selling a business, but obtaining the highest possible price.  An offering memorandum is also referred to as the selling memorandum, a confidential descriptive memorandum, or simply as “the book.” The memorandum, regardless of the terminology used, must be as factual as possible,

Important questions to ask when looking at a business…or preparing to have your business looked at by prospective buyers. • What’s for sale?  What’s not for sale?  Does it include real estate? Are some of the machines leased instead of owned? • What assets are not earning money? Perhaps these assets should be sold off. • What is

A January 2004 survey conducted by the DAK Group/Rutgers found the following breakdown of why businesses are for sale: Reasons To Sell Risk reduction      44% Competition or market changes   41% External pressures     27% Lifestyle factors (age, health, etc.)   14% Lack of capital      9% Ownership/management issues  07% Note: Multiple responses allowed;  Source: DAK Group/Rutgers It is interesting to note that the

The closing is the formal transfer of a business. It usually also represents the successful culmination of many months of hard work, extensive negotiations, lots of give and take, and ultimately a satisfactory meeting of the minds.  The document governing the closing is the Purchase and Sale Agreement.  It generally covers the following: • A description

Another important factor relating to the asking price is the amount of cash involved in the sale. There is an old saying that the higher the full-price, the lower the down payment – and vice-versa. The sale of almost any business involves some seller financing. The smaller the down payment, the higher likelihood of a

Many business owners would like to receive all-cash for their business when selling. And yet they are often told that this is really not possible. Why? Most people are accustomed to financing just about everything – home, car, vacation home, even college for their children. The first question business brokers are often asked is, “How