You have worked hard and built a successful business. Your business may have significant value and could provide additional retirement funds or significant money for retirement. But, how do I go about selling my business or my business interests? This is a common question clients ask a Denver business attorney, and a very important question. How you prepare to market and sell your business may impact the overall purchase price you are able to obtain and the ease at which you are able to sell the business or interest. The article below, drafted by a Denver business attorney at The McGuire Law Firm to discuss issues to consider when preparing to sell your business.
First, the seller should obtain realistic valuations and these valuations may differ depending upon the type of business being sold, the assets of the business and the potential buyers of the business. The seller should look at the value of the business as a whole from two perspectives: one from the point of view of a financial buyer(s) who has no business connections or synergies and two, from the perspective of a strategic buyer who has a business connection or motive and may be willing to pay a premium. A realistic valuation of the business can assist in discussing realistic purchase prices with the potential buyer from the beginning. Given the purchase price is typically the most common pitfall, it can be beneficial to discuss the purchase price from the beginning. When the purchase price is discussed and based upon a realistic valuation, you limit certain issues that could create problems later in the negotiations.
Seeking a potential buyer is an important step in selling your business, but is discussed by our business attorneys in a separate article. The potential buyer will want to conduct their due diligence, which is discussed below. It is recommended that you enter into a non-disclosure agreement prior to disclosing and providing information that is requested by the potential buyer.
The more organized you are, the easier it will be to provide the documents requested from a potential buyer. Further, you will want to make sure you can provide all documents that are reasonably requested. The inability to provide certain documents can weaken your position and thus lessen the purchase price. The list below is a general list that you could expect a potential buyer to request.
– Letter or certificate of good standing with the Secretary of State, and any necessary certificates from states in which you are operating;
– Current financial statements (income statement, balance sheet etc) and prior three years financial statements;
– Copies of current contracts with third parties;
– Current list of assets, fair market value and any encumbrances;
– List of any intellectual property such as copyrights, trademarks, patents;
– List of other business loans and lines of credit;
– Conduct a judgment and lien search;
– Copies of appraisals;
– Prior three year tax returns;
– Customer list;
– Profit and gross margins analysis;
– Sales & Marketing Summary (price points, lead generation, training etc);
– Disclosure of current or potential liability and litigation;
– List of employees, employee benefits, pay structure etc.
The above list is a general list, but you should expect a similar request from potential buyers while they conduct their due diligence.
A Denver business attorney at The McGuire Law Firm can assist you with selling your business. From the preparation to the drafting of documents and negotiating, we will assist you.
Contact The McGuire Law Firm to schedule your free consultation with a Denver business attorney.