To achieve your euphoric future exit event, know the order for engaging advisors
We find that too often private business owners don’t know when the optimal time is for engaging with M&A professionals to guide them in selling their company to a third party. It surprises many to hear the order of priority in establishing these M&A partnerships. Here is what we recommend to private owners thinking of selling their business:
In advance of selling your company, here are the professionals we suggest having on your team to greatly enable getting you to a successful, even euphoric exit event:
- Exit planning advisor – at least a year in advance, even better 2 to 3 years prior, engage an advisor to help guide you through the entire exit preparation process (or as we call it, the exit optimization process). There are many aspects to preparing your company for an optimal exit and this advisor is the first to engage as they are experienced to take away your uncertainty as to what preparation steps you should be taking to lead to your euphoric exit event. This advisor will also help you thru the process of when to engage the following set of advisors to have on your exit optimization team.
- Tax planning advisor – at least a year prior to selling your business, you’ll want to ensure you have an optimal tax efficient structure in place (business and personal) to help minimize the federal and state taxes you’ll owe on the sale of your business. A tax advisor will tell you that they need at least a year in order to give you the greatest number of options for getting a tax efficient structure in place. And depending on your personal situation, in addition to tax advisory there maybe the need for engaging with an Estate Planning advisor and they too should be engaged at least a year prior to starting the exit process.
- M&A lawyer – next in priority of building your exit team is your M&A lawyer and this is approximately 6 months prior to beginning the sale process that you want to be interviewing for your M&A legal partner. Not your business lawyer, but your M&A seasoned legal partner. You’re not just hiring a lawyer to help you get all the legal documents in place, you’re looking for a seasoned M&A lawyer that keeps you from getting sued post-closing of the transaction. Any M&A lawyer can get the documents you need in place for a deal to close, but what you want is the M&A partner that is highly experienced to ensure that all the transaction related documents are negotiated and drafted to keep you from post-closing lawsuits that can commonly arise in M&A transactions.
- Investment Banker/Business Broker – also about 6 months prior to beginning a formal sale process, you’ll want to be interviewing for your partner who in essence will run the auction process for your business. A seasoned broker (generally for smaller businesses) or Investment Banker (for businesses with more size) is licensed to represent your company in the sale process. This partner will guide you through the process of building your Confidential Memorandum that will be used to solicit interest from potential acquirers and will manage the entire process through to receiving offers. One of the reasons you want your M&A lawyer in place ahead of engaging your banker/broker is engaging them is going to require you signing an engagement agreement with them. You don’t want to sign these unless you have your M&A lawyer on your team first to review and negotiate your banker/broker engagement agreement.
Getting to a euphoric exit event requires having a solid team of seasoned M&A professionals around you. You can avoid making deal mistakes by engaging with professionals that have done many deals and know what pitfalls to help you avoid. These professionals can help you by making the deal process less stressful and ultimately have a much greater likelihood of success.