Four Tips for Successful M&A Preparation


In 2022, over five million businesses were created, marking a 44% rise since 2019. Whether you’re one of these newer business owners or a seasoned proprietor, if you’re considering an exit strategy, M&A preparation is needed to help you be successful in conversations with prospective buyers and to achieve your goals. If done right, selling your business can lead to long-term wealth for you and your family. Learn how to position your company well now and for the future.

M&A preparation tip #1: tell a story; sell a strategy

Now in its 15th season, ABC’s hit show Shark Tank presents a mix of aspiring and successful business owners seeking investment and counsel of several experienced financiers. With just a minute or two to pitch their ideas and entice the investors, contestants looking to make a deal must hone their stories and present sound business strategies to solicit offers. The same goes for those looking to sell their business. Here’s how:Telling the Story of a Merger

  • Tell a story – how did your business get started? Where did you go right? Wrong? Draw your buyers in with the details of your origin story and catch them up to this selling moment. While an M&A transaction is principally about financials, both parties involved are human – the ability to connect through a well-crafted narrative is a powerful M&A tool.
  • Know your worth – part of your story must be the numbers. If the acronym EBITDA (earnings before interest, tax, depreciation and amortization) means nothing to you yet, make it part of your vocabulary with an expert business valuation. Having a sense of your worth, especially in context of today’s market, gives potential buyers a clear picture of the opportunity in front of them. What’s in it for them?
  • Share a vision – having a long-term roadmap of your business displays your ability to strategize and paint a picture of the future. Showcase a deep understanding of your industry, as well current and future customers, to help prospective buyers see the potential for growth.

In short, M&A preparation means brushing up on your presentation skills and demonstrating why your business is ripe for a sale. The right mix of numbers and narrative invites buyers to the table and makes a sale palpable.

M&A preparation tip #2: get your house in order

Expect your prospective buyers to do their due diligence with a lookback period of at least three years. Be prepared to show key documents like:

  • Financials – where’s the money? Organize profit & loss statements, asset values, balance sheets, and cash flow statements to show the financial health of your business.
  • Accounting/tax/legal – business formation documents, employment/vendor/customer contracts, tax records, and any intellectual property like patents, trademarks, etc. should be made available and used to help assess value.
  • Business – beyond where your company’s been, where is it going? Share marketing plans, competitive and industry analyses, R&D efforts, and other insight documents about your key stakeholders to let buyers know the people driving your business.
  • Operations – how does your business run? Give buyers a look into your key team members, reporting structures, and physical spaces, being prepared to offer facility tours.

It’s important to review your records before turning them over to identify mistakes and inaccuracies. Be sure to disclose any document discrepancies or issues to your M&A attorneys and financial advisors and seek to fix and/or explain them before documents are turned over to prospective buyers. If there are skeletons in your closet, it’s time to get them out.

M&A preparation tip #3: maximize your purchase price

In a down market, interest rates are high and getting financing can be difficult. Sometimes sellers must get a little creative to make the sale but not sell themselves short. If you’re not seeing eye to eye with a buyer on valuation and upfront cash offers, consider an earnout. Earnouts are paid out

after your closing date based on future success of the company. Ask your M&A attorney if this may be appropriate for you and incentivizing for your buyer.

A taxation attorney may also help you with the allocation of the purchase price for your business. Always seek to maximize your purchase price by negotiating how your assets are being allocated, typically in one of four ways, each with its own tax rates and implications:

  • Inventory
  • Furniture, fixtures & equipment (FFE)
  • Intangibles (including non-competes)
  • Goodwill

As a seller, you’ll want to seek to allocate a large portion of your sale price as goodwill – often those intangible assets like company brand, reputation, customer lists, etc. – to reduce tax liabilities for you, while still meeting the buyer at their desired price point. Seller and buyer records should match when it comes to filing with the IRS to avoid audits, so be sure to broach this early and come to agreement.

M&A preparation tip #4: pick the right advisors

Selling your business is likely a complex opportunity. Having the right partners in place from a legal, accounting, tax, and financial planning perspective will help ensure your sale is successful and fitting for your current and future goals, as well as preserves your wealth.

Our experienced Mergers & Acquisitions team is here to help you with M&A preparation, navigating the intensity and intricacies of your transaction. The broad range of services offered by FLB contributes to our M&A team’s ability to work efficiently and cooperatively with our other practice areas, including real estate, estates, employment and taxation, to provide appropriate “one-stop shopping” for all of our clients’ M&A needs.

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