If you intend to sell your company or believe there may be another business or individual interested in acquiring you, it is important to prepare your business for sale or acquisition to make sure everything is in order. This will maximize the value of your company and the likelihood of success for any potential acquisition transaction in the future.
The first task is to organize existing corporate documents and financials to identify areas of potential weakness. This encompasses all corporate documents, policies and procedures, the validity of client lists, business financials, tax returns, and potential errors or omissions that need to be updated.
If you intend to prepare your business for sale or acquisition, it is important to look for anything that could disrupt a sale down the road. Is there anything that might cause someone to come back and say, “You misrepresented specific circumstances?” What steps can help to ensure the representation and warranties cannot be questioned, resulting in contingent liability after the sale?
Legal disclosures require reviewing all corporate documents to ensure that they are up to date. Your business attorney should review the articles of incorporation, bylaws, the operating agreement of an LLC / partnership, and the shareholder agreement in an S corporation or C corporation.
Is the corporate entity in good standing in your state? Have required statements of information or annual reports been filed? Are required licenses and permits in place, and are all related fees paid? It is important to resolve any tax lien or notice of determination against the company at the state or federal level.
Potential buyers or acquisition partners will want to thoroughly evaluate all contracts, statements, and debt instruments associated with employees, customers, suppliers, banks, and other financial institutions. This is the best time to lock in key employees, ensure all workers are legally and properly classified, and ensure your employee handbook and policies and procedures are up to date.
What additional value does the transaction offer to a potential buyer? How is your company’s intellectual property registered and protected? What trade secret processes have you implemented?
Taking all the right steps to prepare your business for sale or acquisition demonstrates that your company is professionally run, that nothing is amiss, and that you are an attractive option for a merger or acquisition. Organizing all transaction-related documents, tax returns, financial statements, contracts and agreements, and even banking and insurance information in a single room or location can enhance and ease a potential buyer’s due diligence experience.
Taking these and other steps to polish your business before you sell it is a profitable and strategic decision that can pay substantial dividends immediately or down the road. We invite you to learn more about the integrated tax, legal, accounting and business consulting services of Allen Barron and contact us or call today to schedule a free consultation at 866-631-3470.
We will discuss your short and long-term plans, and develop a strategy to prepare your business for sale or acquisition, bring all areas of your business into compliance and polish every aspect of your company so that it will be as attractive (and valuable) as possible.
