The 5 Dos And Don'ts Of Preparing For An Exit As A Founder, According To M&A Experts

The global network of merger and acquisitions (M&A) experts at Exitwise have seemingly seen it all when it comes to founders and owners selling their businesses. 

As founders themselves who’ve experienced the successes and failures of selling a business firsthand  the Exitwise team says it leverages decades of experience and industry relationships to help fellow business owners get the best possible outcome as they navigate their exits. 

Here are five essential dos and don’ts that the advisers at Exitwise report that they want every founder to know before selling a business. 

Do - Figure Out How Much Money You Need

While the ultimate value of the sale is determined by what the buyer is willing to pay, it helps to have a number in mind of what you actually need as you negotiate. This can help you determine whether an offer is worth considering and even figure out whether now is the right time to sell. 

As a business owner, you’ve probably gotten used to a generous expense account and company-financed business trips and meals. You might also be used to having health insurance provided through your business — and all the tax and financial incentives that come with it. 

These are all things that you’ll have to pay for out of pocket after the sale. So the amount of money you need is not necessarily the same as your current out-of-pocket spending. Make sure you’re factoring in added expenses and cost increases that will come with maintaining the standard of living you want after you exit.

If you’re planning to finance a new venture with this sale or leave money to your children, make sure you’re working with a realistic budget, including enough padding for unexpected costs or obstacles.

Do - Understand And Plan For The Tax Implications Of The Cash Windfall From A Sale

An easy mistake to make when coming up with that target amount you need from the sale is overlooking the tax implications of getting that large cash windfall. While you’ll likely end up seeing a higher tax bill as a result no matter what, proper planning and preparation can help you develop a more tax-efficient strategy. 

Don’t - Get Careless With The Details

Buyers are cautious and extremely wary of getting burned in an M&A transaction so the onus is on you to make sure the paperwork is in order, accurate and free of any red flags that could scare a potential buyer off.

“Buyers can and will root out any inaccuracies in statements, reports or forecasts,” Exitwise founder Todd Sullivan warns.  If your books haven’t been audited recently, make sure you schedule one before scheduling any meetings with potential buyers.

You should be equally thorough with your legal foundation — being prepared to disclose any litigation or potential legal exposure that could come out during the buyer’s due diligence.

Don’t - Neglect Your Day-to-Day Operations In The Meantime

When you’re preparing to sell, it’s easy to get so wrapped up in making sure your paperwork is in order and the terms are squared away that you lose focus on actually running the business. Be aware that a revenue dip just before a sale is finalized can kill the deal altogether. 

Be prepared to have a full plate (and to delegate well) during this process so that you can exit cleanly without worrying about the sale falling through at the last minute.

Don’t - Risk Your Biggest Financial Asset By Trying To Go It Alone

Navigating all of these discussions about how much money you need and how to prepare for the tax implications, all while thoroughly auditing your company’s financial and legal records, is not easy to do on your own, even if you have sold a business before.

On top of all those logistics, you need to get meetings with the right buyers and navigate the actual negotiations and terms of the sale itself. To do that, you need great representation and support — specifically from attorneys, accountants and investment bankers who know your industry.

“You need the top investment banker or M&A adviser who focuses exclusively on your specific industry,” Exitwise CEO Todd Sullivan said. “This is somebody who’s sold multiple businesses just like yours, who already has personal relationships with your likely strategic buyers.”

To help with that, Exitwise says it has assembled a premium network of industry specialized M&A experts, all with deep personal buyer relationships with industry leaders like Microsoft Corp. MSFT, Activision Blizzard Inc. ATVI and L’Oréal SA LRLCY to help businesses of all sizes find the right opportunity to sell.

After an initial consultation to learn about the history, financial performance and management of your business, Exitwise reports that it will screen its database of hundreds of investment bankers, M&A attorneys and tax accountants spanning over 200 industries and present you with a shortlist of the best matches based on industry familiarity, transaction history and fee structure. 

This post contains sponsored advertising content. This content is for informational purposes only and is not intended to be investing advice.

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