I was working with a client recently who was involved in several lawsuits that came as a result of buying businesses that didn’t work out well. While we were drilling down on some of the problems that caused the legal issues to appear I found out that he never engaged appropriate professional advice before he did the deal.
Some of the lack of appropriate advice was because of the intermediary he worked with while doing the deal. This intermediary represented both the buyer and the seller. I’ve written about this issue separately and won’t repeat myself here except to say that you should never, never, never allow an intermediary represent both sides of a deal.
If you are contemplating either a purchase or sale of your business, you should engage good advisors who specialize in this work before enter a business sale transaction. The money you spend upfront likely will keep you from having an unhappy result on the back end.
Here are some reasons you need to use exit-planning professionals before you do a business transaction:
You’re likely to have a more successful transaction.
Even if you’ve bought several businesses, professionals who spend their life putting deals together will have seen more problems and have solutions that you may not have thought of. An exit planning professional’s reputation is based on doing deals that are successful. Their job is to keep you out of trouble and reduce post-closing costs.
You can get help doing appropriate due diligence.
I joke that due diligence is really an excuse for the seller to lower the offer price of the business. If you’re a seller you want your intermediary to run your due diligence team. As a buyer, you want either an intermediary, your CPA or deal attorney to run your side of the team. These people have been through this drill many times and the fees you pay will likely be returned to you many times.
You can get help determining the “right” price for the business.
You will need to do your own analysis of what you think the business is worth. At the same time there is nothing wrong with having an exit planning professional help you determine what is the “right” price. They might see something you’ve missed that will keep you from losing money after the deal closes.
You can likely save large legal fees from mistakes you’ve made.
A properly represented transaction often has significant fees upfront. On the other hand, if those fees aren’t paid before the deal, you could have ten times the fees trying to correct mistakes that wouldn’t have happened if you engaged the right advice for doing your transaction.
If you’re a seller, you likely aren’t going to sell more than one or two businesses in your life. If you’re a buyer, most of the time you won’t spend the majority of your time acquiring other businesses. This is why using advisors who live, eat and drink transactions makes sense. They really do save you money and heartache.
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