Q: When should I start talking to an attorney?
A: Now, before you have a buyer, before you have a number, and before anyone puts a term sheet in front of you. Often a business owner spends months negotiating with a potential buyer and calls an attorney only when a deal is already taking shape. By that point, meaningful opportunities have been left on the table. Early planning can reduce corporate, individual, and estate taxes; help maximize the selling price; and make the entire process less stressful. Areas for counsel to address early include tax planning, management incentives, and legal and operational housekeeping.
Q: What professionals do I need, and who leads the selling process?
A: In addition to your investment banker or business broker and accountant, a skilled attorney is essential. From the first planning conversation through closing, your attorney coordinates the deal team and addresses the broad range of legal issues a business sale triggers. Good legal counsel provides invaluable drafting expertise on the purchase documents, especially the seller’s representations and warranties, where the risk of post-closing liability is highest.
Q: How do I determine the proper payment terms?
A: The purchase price can take many forms, including cash, stock, seller financing, earnouts, or non-compete payments, each with different tax consequences and after-tax results. A realistic valuation grounded in current market conditions, combined with a clear understanding of how consideration will be structured, is essential before any deal is reached.
Q: What should I be doing right now to prepare my business for sale?
A: Your attorney will help evaluate structural issues, identify alternatives, and help you confirm that an outright sale is the right path. From there, the focus shifts to maximizing value by cleaning up legal, financial, and operational issues before a buyer finds them.
Q: What will a buyer look for in due diligence?
A: Buyers will scrutinize every aspect of a business, including financial statements and tax returns, contracts, corporate records, employment matters, intellectual property, insurance, pending litigation, and regulatory compliance. If real estate is part of the deal, expect additional scrutiny of the property as well. Surprises discovered during due diligence give buyers leverage to renegotiate price or walk away, so it is best to proactively address known issues before the sale process.
Q: I have a buyer. What does the road to closing look like?
A: Once a letter of intent is signed, most deals run 90 to 120 days to closing. During that time, the buyer conducts due diligence while your attorney negotiates the definitive purchase agreement and other transaction documents, addresses the broad range of legal matters that arise along the way, and keeps the process on track. The right attorney, engaged early, separates a smooth closing from a stressful and costly one.