If you are selling your business or entering into a significant transaction with your business, you must have answers to these questions, in order to maximize an efficient outcome.
-Do you trust that you have the best investment bank/bankers for your transaction?
-Are your bankers correctly incentivized to ensure the best outcome for you, your family, your employees, and your shareholders?
-Do you have an experienced lawyer, who understands your unique situation?
-Have you discussed locking in your legal fees to save money?
-Do you have a transaction-focused accountant who understands, and is up to date on, tax strategies for transactions like yours?
-Are you doing an asset sale or an entity sale?
-Who are the three “Trusted Resources” on your team that will help you do all the heavy lifting on the transaction; and who will keep their mouths shut for the 6-month to 12-month closing cycle?
-Do you fully understand the difference between selling your business to a strategic buyer, who may pay far more, versus selling your business to a financial buyer, who will pay a pre-established “market multiple” for your business using an industry playbook?
-Do your bankers and advisors have an “already know-it” mentality when it comes to exit valuations? This means that since they already know that your business will sell for 5 times revenue (as an example), then they would be far less likely to brainstorm for out-of-the-box ideas to attempt to skyrocket your exit price.
-Are you confident that you and your team have provided all necessary information to the buyer; so that they can’t use any shortfall against you in order to attempt to renegotiate the terms of the deal at the last minute, while you have deal fatigue?
-Have you made your earn-out as painless as possible for you and your key partners, since working for a company, and having a “real job,” is often very difficult for freedom-loving former business owners.
-Have you considered taking some or all payment in the form of stock ownership in the buyer, instead of all cash; to give you more upside potential long-term?
-Have you considered remedies in the event the deal takes longer than expected?
-How will you keep yourself and your team focused on growing the company and keeping the company objectives/rhythms alive, while the deal is consuming vast resources, like time, attention, and money?
-Are your contracts locked down and finalized for all key employees?
-Are your key vendors and clients on board with the transactions and will they keep things confidential?
-How are you incentivizing your team both pre-sale and post-sale?
-How much diligence have you done on the buyer to be sure they have the cash and wherewithal to consummate your transaction?
-Do you have audited financials to give more confidence to the buyer community and potentially increase the sale price of your business?
-Do you have the best data room software, and have you and your team stocked it to the gills, to give buyers confidence? (see data room documents below).
-Do you have a trusted, experienced deal advocate between you, your bankers, your lawyers, your accountants, and the buyers, so you have a shoulder to cry on or a person to speak to at critical times during the transaction cycle?
-Have you done a thorough auction to ensure that you have the best bankers, the best buyers, and the best terms?
-Have you structured the deal so that you get an optimized amount of cash or stock up-front, along with a back-end payout that you are confident you’ll receive?
-How are you handling confidentiality with your team? With your clients? With your industry? With your family?
-When the deal gets hairy, and it WILL get hairy, who are you going to call for advice at midnight on a Saturday night?
-How are you managing your money after the sale?
-What is your estate plan?
MUTUAL CAPITAL ALLIANCE, INC. DUE-DILIGENCE REQUEST SCHEDULES
Please use this list as you contemplate what to insert into your electronic data room.
In order to make your sale transaction go as smoothly as possible, it is important to have a “well-stocked” electronic data room. There are many software packages that you can use to make this easy.
All information and documentation requested in a typical due diligence request schedule should be read as a request for all such information and related documents for each such affiliate, subsidiary, joint venture, or other related entity to the extent applicable. In your data room, it is important to clearly indicate the corporation – or other related entity – to which your responses relate.
Please note that this is not an exhaustive list. Each industry may have its own unique documentation, and all of that would need to be added as well.
|Corporate Organization, Authority, and Qualification||Schedule A|
|Capital Stock and Shareholder Matters||Schedule B|
|Subsidiaries, Joint Ventures, and Other Investments||Schedule C|
|Contracts and Commitments||Schedule D|
|Regulatory Matters||Schedule E|
|Intellectual Property||Schedule G|
|Information Systems||Schedule H|
|Director, Officer, and Employee Matters||Schedule K|
|Labor Matters||Schedule L|
|Employee Benefit Matters||Schedule M|
|Environmental and Employee Health and Safety||Schedule N|
|Corporate Promotional and Other Information||Schedule O|
|Warranty Matters||Schedule P|
|Internet Matters||Schedule Q|
|Tax Matters||Schedule R|
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