Four Issues
Questions and answers to the four biggest issues facing selling
shareholders...
What is the value of my business?
How long does it take to sell a business?
What are representations and warranties?
Do I really want to sell my business?
Value is the #1 concern of selling shareholders, and most business
owners do not have a good feel for the value of their own company.
It is critical that a reasonable market value be placed on a company
before the business is made available for sale. Otherwise, the
business owner exposes his company, employees, financial records,
etc...to the marketplace with a low probability of actually closing
a deal. We strongly urge business owners to seek professional
help in valuing their company prior to marketing the business!
Each deal is different, but the average timetable is five (5)
months. The first 60-90 days typically involve finding and qualifying
the right buyer, touring the plant(s), studying the financial
statements, and generally understanding the business. The remaining
weeks of due diligence are spent with lawyers, accountants, and
bankers documenting the transaction. Complex lending requirements
and environmental audits and violations can cause significant
delays in selling a business.
Many business owners think that when they sell their business,
they can walk away from all obligations of their former company.
This just does not happen.
Today, a business owner must face up to the obligations and contingent
liabilities of his company while he owns the company and document
these issues for the new owner. Some of these issues include accounts
receivable quality, E.P.A. compliance, I.R.S. compliance, and
product liability coverage.
The general theme of representations and warranties is that the
buyer is responsible for the actions of the company after the
closing, and the seller is responsible for the actions of the
company prior to the closing. We encourage both buyer and seller
to retain skilled attorneys to help them navigate these legal
issues.
All business owners wrestle with this major decision. Much of
the decision is based on business value, terms of the deal, who
the buyer is, personal and family desires, how long is the transition
period, etc...
However, if all the above issues are met satisfactorily, will
the owner actually sell? Each business owner must address this
issue and qualify himself as a seller. Placing a business on the
market and then retracting it can be detrimental to the company.
Above all, honestly qualify yourself as a seller before you plan
to sell the business!
Each business owner should establish and periodically update
his goals for his company and his exit from the company. This
type of planning will alleviate much of the stress and anxiety
of selling a business and will improve the probabilities of selling
at the right time, to the right buyer, and on the most favorable
terms.
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