California business owners should understand the important steps to take when preparing to sell a company here in San Diego or throughout California. Establishing and proving the business’s worth to potential purchasers can be a daunting task, but with the right moves and some guidance from the Watkins Firm you can complete a successful and profitable transaction.
Reports show that in the last three years, acquisition prices have grown by 30 percent. In this climate, business owners should be aware of some issues to keep in mind when preparing to sell a company.
The Watkins Firm brings 40+ years of experience serving the business, science and tech, real estate and medical / healthcare communities here in San Diego and across California to your side of the transaction. Your Watkins Firm attorney provides valuable insight and guidance to business owners and shareholders alike to ensure a smooth and profitable transaction. We work with our clients to help position the business for maximum value while reducing present and future liabilities and contingencies.
First, the owners should assess their willingness to be purchased, including discussing any pertinent legal and taxation issues which could result from a sale. Next, an analysis of the company’s readiness for purchase should be done. This includes a professional valuation of the company as well as a substantial review of your company’s books and financials. Buyers conduct extensive due diligence and facilitating financial analysis for a buyer is one of the most important steps to take when preparing to sell a business.
Another of the important steps to take when preparing to sell a company is preparation to discuss market positioning and other metrics that can will make your company attractive to buyers. A buyer will want to assess not only the immediate viability of your company and the post-purchase decisions, but changes, actions or additional investment which may be required to preserve existing goodwill and move the company forward. Ease of integration into the existing business is a substantive concern for any buyer.
Pro Tip: “There’s three things you have to do when you buy or sell a company. You have to have an experienced, proven transactions lawyer that understands business. You have to have a good accountant that knows more than just filing taxes, how to help you with due diligence to make sure that your books are ready to go, so that you can sell for top dollar. Finally, a strong banking relationship.
Now, if you’re going to do a stock sale or stock purchase, that company may have everything ready to go in place. You break it all apart, you may need to start all over. You’re coming in and need to do a really good due diligence on your own. You end up with a company that’s able to successfully transition, and repeat everything it was doing that provided that value in the first place.” – Dan Watkins, Founding Partner
Lastly, the company should prepare a list of different exit strategies, which would include gaining an understanding of the effect each type of acquisition transaction would have on shareholders and management and preparing the company’s presentation to prospective buyers. Usually, key employees [including the owner(s)] need to be contractually committed for a period of time to protect the integrity of the acquisition as well as existing customer relationships. This also provides an opportunity to address any issues that might arise as well as any discrepancies in the representations and warranties.
Preparing to sell a company is almost always a complicated, multi-step process. The business mergers and acquisitions attorneys at the Watkins Firm have more than four decades of experience in these complex business transactions. We help to guide the parties through the process and ensure the sale goes smoothly.
We invite you to review our podcast Episode 40 – Keys to a Successful Stock Purchase Acquisition as well as the strong recommendations of our clients and contact the Watkins Firm or call 858-535-1511 for a complimentary consultation today.
