Exit Strategies for European Tech & Life Sciences Companies – Artic 15, Helsinki

At the Artic 15 Conference: Exit Path in Helsinki, I describe exit strategies for European technology and life sciences companies. And explain why I believe growing a knowledge-based company in Europe today can be better than building one in Silicon Valley.

Highlights include:

  • Why it used to be easier to grow a company in America
  • Yes, raising capital in Europe is more challenging and why
  • Fortunately, capital is less and less important today
  • Technology also makes face-to-face communication less important
  • Virtual companies are more competitive
  • Today, I believe most of Europe is a better place than Silicon Valley to build a tech or life science company
  • It all comes down to where knowledge workers want to live
  • Now most companies can be anywhere
  • The market for exits (M&A transactions) is global
  • Today, exits aren’t really different in Europe

No One Can Sell Your Cash Well

What I’m about to describe is difficult for some people to understand. Recently, I completely failed to convey this concept to an experienced professional accountant.

The fact is, nobody can sell your cash well.

What I mean is this: if you’re thinking about selling your company, I feel strongly that it’s desirable to strip out the cash that’s not absolutely necessary before starting the exit valuation negotiation with prospective buyers.

Even better, the company should have just the right amount of debt, probably in the form of a bank operating loan, to smooth out the peaks and valleys in working capital.

While I can’t prove this mathematically, I feel strongly enough to recommend that owners strip out the cash before the exit, even if it means incurring some tax.

The simple reason is that buyers will pay less than a dollar for a dollar’s worth of cash. (This made no sense at all to the professional accountant that I tried to explain this to recently.)

It may help to imagine two scenarios, where companies with exactly the same income statements have balance sheets which differ by $1 million in excess cash. If you offered each of these companies to 100 buyers, the average price for the company with the cash would be less than $1 million more than the company without the cash.

This is the result of the imperfect science of company valuation plus the peculiarities of human psychology.

Valuation based on multiples

Almost everyone will think, at least in part, of company valuation based on revenue or profitability multiples. Buyers are used to thinking that certain types of businesses are worth four to six times EBITDA. Or that certain types of companies that are growing at 50 to 100% per year are worth three to four times revenue. These multiples evolve from comparative valuations.

When people use multiples for valuation, they often switch back and forth between the current year and the next projected year. Depending on the company growth rate, that can result in a very big difference in the valuation, which illustrates how imprecise valuation calculations are.

In my direct experience, almost nobody will take into consideration the additional value of having cash on the balance sheet when doing a valuation based on comparative multiples.

Cash makes the price higher

Having excess cash compared to working capital requirements makes a company more expensive. Sellers will expect to get the same multiple described above, plus a fair value for their cash. From the buyer’s perspective, they are being asked to pay what they think is a fair price plus an additional amount. (At this point the professional accountant thought I had lost my mind.)

But the reason this is an impediment is that the people who buy companies have to go through an internal consensus building process to get to an approval. Some of the people they need to ‘bring onside’ will not take the time to appreciate that there is excess cash on the balance sheet. I know this seems difficult to believe, and you’d expect that even people in a large company would care about whether there was an extra million dollars or not, but on average they care less than the actual value of the cash.

The higher the total price, regardless of how much cash is on the balance sheet, the more difficult it is to get the valuation approved. This difficulty creates a suppressive effect on the total valuation (i.e. the value of the business + the cash).

Most buyers have too much cash

It’s a fascinating and difficult-to-appreciate psychological fact that most buyers have so much cash that it’s a problem. For them, having cash come along with an acquisition really isn’t any advantage. Cash is the least of their concerns.

Working capital efficiency

Perhaps the most logical reason that nobody can get full price for excess cash is that buyers will assume that the previous shareholders left that cash in the company because it’s required to operate the business. What this means is that the buyers will discount the value of the cash because they consider it necessary to generate profit. In their minds they’re paying for the stream of future profits, and they don’t really spend a lot of time thinking about what assets are required to generate those returns.

The more working capital that’s required, the more they’re going to reduce the value of the business. In other words, the most valuable company is one that can generate a given profitability on the smallest amount of working capital. In other words, that company is a more efficient generator of profits – and is therefore more valuable.

Closing working capital

An experienced M&A Advisor will always negotiate the amount of working capital at closing. This is one of several dozen tactics to maximize the value received by the sellers. It can also be a powerful tool in increasing the probability of closing.

The optimum amount of working capital at closing is usually zero, or perhaps a modest amount such as $250,000 or $500,000.

The idea situation when the transaction closes is not to have any significant amount of working capital above that specified at closing. The reason is that if the company has excess working capital, it will require another cheque to be issued by the buyer several months after closing. This is always problematic because in the post-closing transition it will take the buyers a number of months to stabilize their accounting systems.

Every time we’ve had to help buyers and sellers through a post-closing working capital adjustment it’s been arduous. The need to re-engage also occurs at a time when the buyer and seller are both looking forward to not working on the transaction, but instead working on the newly acquired business or their recently expanded investment portfolio.

Summary

Nobody can say how much any of these factors affects any individual’s perception of value. But there’s no question in my mind that, taken together, the important conclusion to be drawn is that the value of excess cash in a company is worth more to the seller than to the buyer.

For these reasons, it’s usually worth the time at the early stages of the exit process to investigate the options for stripping out the cash and possibly even putting in place enough debt to provide the optimum amount of working capital.

Financial Model and Projections

For almost every M&A transaction the Confidential Information Memorandum (CIM) contains both actual financial results and projections.  (The rare exception is a company whose entire value is a patent portfolio.)

In companies with external investors, management teams are familiar with projecting financials. This is a necessary part of projecting future financing requirements.

For the increasingly larger number of bootstrapped, or internally financed, companies that are ready to exit, the entire idea of projecting future financial performance is often unfamiliar. Many CEOs have asked me what the benefit is of a projection when so many variables are impossible to predict.

That’s a good question.

Why Buyers Want Financial Projections

There are several reasons financial projections are included in almost every CIM:

1.    The current management are the world’s experts on this particular business. What the buyers really want to know isn’t the financial history, they want to know the financial future. The best people to ask about the future prospects are the current management team.

2.    Financial projections are the most important input to the valuation conversation – especially for high-growth companies. If a company has five years of historic financials with steadily growing profitability, then historic financial performance may be adequate for valuation.  But with many modern companies, especially technology companies, the growth rates are so high that the historic performance becomes less and less valuable as an input to valuation – especially for the sellers.

3.    For many buyers, the starting point when looking at any new company is the financials. When they receive a CIM, they’ll page ahead to the graphs showing the combined historical and projected financial performance. That’s what they want to see first to provide an orientation. That’s just how their brains work. Every buyer is different and a good CIM needs to answer every question.

You Can’t Predict the Future and You Shouldn’t be Liable

Buyers know the company management can’t predict the future.  Nevertheless, they absolutely want to see, and discuss, management’s opinion about the future opportunities for the business.

CEOs and boards are often concerned about liability associated with projecting financial performance. They’re often familiar with the prohibition on projecting financials in public companies. The private M&A market is quite different. With M&A transactions, the definitive agreement should always make it clear that the buyers have not relied on the financial projections to leave no possibility for a potential liability. With a good M&A lawyer on your exit team, there shouldn’t be any liability in honestly projecting future financial performance.

What’s Required?

For companies that have been operating for more than two or three years, the standard financial model includes:

  • Annual financials from start-up or the most recent 5 years
  • At least 12 months of detailed projections  (‘the monthly budget’ for at least 1 full year plus the remaining months in the current year)
  • Three years of projections (after three years buyers know the projections are usually a copy and paste)

The entire financial model should be in one Excel sheet (so if a buyer had a large enough monitor they could see the entire company history and projected performance on one screen.)

Normalization

In private-company M&A transactions the financial model is usually ‘normalized’ to produce a ‘normalized EBITDA’. This process adds back items that are either non-recurring or wouldn’t be incurred if the buyers owned the business. This process usually requires some discussion for each company’s accounting policies – and I won’t try to describe all the variables here. The normalized EBITDA should be the amount of ‘free cash flow’ the company has generated (under the normalization assumptions) and will generate going forward.

Revenue Detail

Unlike standard financial statements, the financial model should include revenue detail by product. If a company has four primary products, or product lines, then each should have a row above the total revenue subtotal. When the gross margins are significantly different for different products lines, the model should also include a cost of goods line for each product.

Expense Detail

Some companies use very detailed expense categories in their accounting systems, which may be more than the optimum level of detail for a private company M&A financial model. The expense detail in a CIM is usually less than the detail companies have in their accounting systems but more than you’d find in a public company annual report.  Most companies use between 10 and 20 expense categories. This is another area where there are no absolute rules and each case has to be considered based on the characteristics of the company.

Presentation and Graphs

Most CIMs include a bar graph showing historic and projected annual revenue similar to the examples below. Generally a separate graph is used to show the normalized EBITDA over the same years. These graphs are very similar to what you’d see in a public company annual report. The financial model bar graphs are usually included in the executive summary as well.

Input from the External Accounting Firm

Depending on the team’s level of accounting expertise, it often makes sense to involve the company’s external accounting firm when preparing the normalizations and projections.  Accounting firms are familiar with typical practices for normalization. For many companies today, revenue recognition has become a very important element in financial statements and projections. Most management teams just aren’t familiar enough with the new revenue recognition policies under GAAP or IFRS accounting standards. When you’re showing projections in the same spreadsheet as your historic financials, it’s essential that the same accounting treatment be applied for the historic and future periods. For these, and other reasons, I believe it’s usually advisable to have the external accounting firm review the complete financial model, check the normalization, projection methodologies, assumptions and formulas.

How Not to Sell a Business

This is the first time I’ve described all of the things we did wrong the first time I tried to sell a business. It’s also the story of the first time I lost several million dollars.

How Not to Sell a Business – Don’t Blow The Biggest Deal of Your Life

This is a talk I gave to the Vancouver Chapter of the Entrepreneurs Organization (EO) on February 19, 2009. It is consistently the most viewed video on my blog.

In this talk, I compare my first experience selling a business to a more recent one where everything was perfectly planned and executed.

PowerPoint PDF here

Highlights of Part 1:

How Not to Sell a Business Part 1

  • This is the first time I’ve described all of the things we did wrong the first time I sold a business. It’s also the story of the first time I lost several million dollars.
  • During this presentation, I compare my first business sale to a more recent one where everything was perfectly planned and executed.
  • My story begins with the launch of my first company, Nexus Engineering, while I was still in university.

Highlights of Part 2:

How Not to Sell a Business Part 2

  • I wish we had done a secondary sale before we sold the business.
  • I confess that we had never discussed our exit strategy.
  • We start to learn about exit strategies at the worst possible time.
  • We make the classic error of having the CEO sell the business.
  • I learn that every business sale needs multiple bidders.
  • What happened because we hadn’t checked the alignment on our exit strategy.

Highlights of Part 3:

How Not to Sell a Business Part 3

  • Painful lessons about how nasty take-over battles can get when you sell a business.
  • I was a rookie and ended up playing defense all the way through.
  • We finally get the business sold, but my regret was that we ‘rode it over the top’.
  • It took me another ten years to understand all the things we did wrong.
  • The truth is… we were lucky. To this day, I wish we’d had a good exit strategy and checked the alignment before we started to sell the business.

Highlights of Part 4:

How Not to Sell a Business Part 4

  • This is the story of the Parasun business sale – where we did everything perfectly.
  • We developed alignment on a simple exit strategy at an offsite planning retreat.
  • At Parasun, we successfully executed two secondary sales before we sold the business.
  • We sell the business right on schedule, but the price was 48% higher than the target.
  • A comparison on the Nexus and Parasun exits – what to do and what not to do selling your business.

Many of these lessons are described in my new book on selling businesses for entrepreneurs and angel investors – www.Early-Exits.com.

If you enjoyed this video, you might also like this one on Exit Strategies or this series on Maximizing Value in Business Sales.

The Value of a Sellability Score

The Sellability Score was created by my friend John Warrillow who also wrote Built to Sell. If you are thinking about selling your business now, or at some point in the future, the Sellability Score will be valuable to you.

A Sellability Score is an external, unbiased evaluation of your business’s worth on the open market, calculated by grading your company against eight key factors. These factors include:

Financial Performance – Gauging a business’s profitability is perhaps the most well-known valuation method. Basing a sale price off of an evaluation of financial performance alone, however, can be a risky approach for both parties.

Growth Potential – Like every great investment, businesses are not bought for what they are, but for what they can be. Realistic growth projections are essential for setting a sale price.

The Switzerland Factor – Over-reliance on one or a few clients, suppliers, and employees can negatively affect a business’s perceived ability to adapt to change.

The Valuation Teeter-Totter – The relationship between a business’s revenue and expenditures can be best understood through an analysis of the business’s cash flow cycle. There’s a big difference between trying to sell a business with a negative cash flow and a company with overflowing revenue.

The Hierarchy of Recurring Revenue – The degree to which a business’s revenue is recurring directly correlates to the business’s likelihood of sustained stability. A high degree of recurring revenue is an attractive attribute for a business to possess, though it is not a factor for all business models.

Monopoly Control – Businesses with highly differentiated products and services enjoy the luxury of not having to rely on pricing to remain competitive, and are thus, very desirable acquisitions.

Customer Satisfaction – Tracking and gauging the level of your customers’ satisfaction is a good policy under any circumstance, but can be an especially important as a selling point. Businesses with a large base of satisfied clientele are more likely to benefit from referrals and repeat business.

Hub & Spoke – Businesses that are overly reliant on the stewardship or talents of its owners can be viewed as a risky acquisition. The degree to which a business can successfully undergo an ownership transition has a significant impact on sale price and to whom you should be marketing your business.

A Sellability Score will let you know exactly where your business falls on each of these scales, as well as its overall “sellability” as an acquisition. Even if you’re not planning a sale in the foreseeable future, the insight garnered from a Sellability Score can help you identify and isolate weaknesses in your business model, better preparing you to successfully negotiate an optimum price when the time comes.

Get your Sellability Score here (it’s free). You will receive a 26 page report on the sellability of your business. I’d also appreciate hearing your comments on the Sellability Score as a comment below or by contacting me directly. Thanks.

Only 25% of Saleable Companies Exit

I’m convinced that only about 25% of the businesses that could be sold actually end up successfully exiting.

Yes. I believe that about three out of four times when a company could have been successfully sold, a sale did not end up happening – ever. And most of the time, it was avoidable.

The Frustrating Lack of Data on Exits

One of the most frustrating aspects of researching exits is the lack of data on transactions under $50 million, which are about three quarters of all exits.  I have spoken with most of the organizations that manage databases that include information on entrepreneurial companies, early stage investments and exits, and I am certain the data does not exist.

There are now a few groups who are just starting to accumulate some of this data, but we’re at least a decade or two away from having a sample large enough to be useful in developing best practices on exits.

This lack of valid data means that while something may be true, and even fairly obvious, most of the time we just can’t prove it.  For now, the best we can do is develop best practices based on empirical observations.

This article is about one of these truths. Based on my observations and hundreds of conversations with entrepreneurs, investors and M&A professionals, I have no doubt that what I have written here is true, but I wish we had the hard data to prove it.

My Observations on Exits

Since the early ‘80s, all I have done is start, grow, finance and sell technology companies.  I have invested in about fifty companies, sold several dozen and had a front row seat to watch more than a hundred grow from their early stages to their eventual conclusion.  I believe I’ve developed a pretty good understanding of which companies were saleable and when.

I Believe Only 25% of Saleable Companies Actually Exit

I’m convinced that only about 25% of the businesses that could be sold actually end up successfully exiting.

Yes. I believe that about three out of four times when a company could have been successfully sold, a sale did not end up happening – ever. To be clear, I am not including unsuccessful exits – for example, where the company has not succeeded and another entity acquires the assets for a low value. What I am writing about here are ‘successful’ exits where the investors end up with a smile on their face.

It is also possible that a single company will end up creating more than one saleable business. The best example is our recent understanding of how many startups pivot. Often pivots are the result of failing to exit the prior business when there was an opportunity. It’s not uncommon for persistent management teams to build two, or three, saleable businesses in one company before they actual exit.

Of course, I’m not saying this happens exactly 25% of the time.  We just don’t have the data to be anywhere near that accurate.  But I’m certain it’s less than half the time, and I’m pretty sure it’s less than a third of the time.

What gets me excited is imagining how much wealth could be created if we could improve our best practices to increase this percentage of saleable companies to even 50%. That would double investor returns and create twice as many wealthy founders and entrepreneurs.

Increasing the rate of successful exits to half would also create a lot more economic activity. Investors would invest more capital, more entrepreneurs would create startups, and more successful early stage companies would be scaled up by cash-rich corporations and private equity funds, all of which would create more economic growth and good quality jobs.

Why Do Only 25% Exit Successfully?

Why do so few companies that could be sold actually exit successfully?

Like many parts of business, or life, there is no single, simple explanation.  Each case includes a different combination of factors which combine to end up in either a successful exit or not. Following are some of the main reasons companies end up failing to successfully exit.

1.    The Exit Team Failed to Execute

In a depressing number of cases, the board of a company will decide that they would like to exit but the team they assemble will fail to execute.  I believe there are two primary reasons this happens:

– The company wasn’t actually saleable (at that time), or

– The team that was assembled didn’t have the skills and experience to successfully execute the exit.

I used to think that when a board decided to assemble a team and execute an exit, they were successful about half of the time.  More recently, though, as I have observed more attempted exits and spoken to at least a hundred more M&A professionals, I have revised my estimate, and I now believe attempted exits under $50 million only succeed about 25% of the time.

This summer, I spoke at the national AM&AA conference in Chicago, and another speaker there said that she thought the percentage of time companies successfully executed their exit was only 5 to 7%. Here statement was based on the often referenced study from the US Department of Commerce that reported only 20% of the businesses that are for sale will successfully transfer hands to another owner.

2.    Boards Don’t Realize the Company is Saleable

I’m surprised to see how often an entire board will fail to realize that a company is approaching, or has even passed, a saleable stage of development. I think there are two reasons why boards miss this so often:

– Experienced directors are very difficult to recruit and retain today. Very few boards have even one member who has been closely involved with more than a few exits.

–  Many of ‘the rules’ about M&A exits have changed dramatically in the last ten years. Very few entrepreneurs, directors or investors appreciate how much this part of the economy has changed. Experiences from a decade ago can often lead to entirely wrong conclusions.

These factors often lead boards to develop strategies to:

–  delay starting the exit process,
–  accept additional financing because they believe the company needs to scale before exiting, or
–  accept licensing or partnership offers because they feel like a bird in the hand.

In a short while, I will be sharing some very valuable information about the Pacinian exit.  This was a good example of where directors and stakeholders had a variety of mutually exclusive opinions about the best strategy for the company.

3.    The Board was Waiting for an Unsolicited Offer

This is one of the exit failures I really hate to see. Surprisingly, boards believe the right exit strategy is simply to wait for an unsolicited offer.  This almost certainly ensures an exit valuation significantly below market. But worse, this strategy also dramatically reduces the probability that the exit will actually complete.

As I have said many times before, I think it’s almost always bad news for shareholders when a company receives an unsolicited offer. Yes, just receiving the offer is usually bad news.

4.    Riding it Over the Top

“Riding it over the top” is an increasingly common way to fail to exit. I don’t’ want to be too hard on the decision makers in these companies. This is a relatively new factor in our economy, And the importance of not riding it over the top has increased significantly in the last few years.  Here’s my guide on how to ensure you don’t ride it over the top.

This talk also describes why exit timing is so critical and why missing the optimum time to exit doesn’t just mean exiting later and probably for less money. It very often means not exiting at all.

How to Improve Your Probabilities of a Successful Exit

What can your company do to improve the probabilities of a successful exit?

There are quite a few elements to a complete answer, but I think the two most important are:

–    Education – Read all the good information you can find, and talk to as many knowledgeable people as you can get in front of. If you have the opportunity, attend some of the new workshops on exit strategies. (Here is a link to an excellent exits workshop coming soon.)

–    An exit strategy – I strongly believe every company should have an exit strategy. This one best practice alone will dramatically increase your probabilities of a successful exit.

Please post a comment below if you disagree with my 25% estimate of if you have suggestions on other ways entrepreneurs and boards can improve this percentage. Thanks.

The Psychology of Exits

When a saleable company fails to sell, it’s often the seller’s psychology that kills the transaction. Most of the time, the seller doesn’t even know that they were the reason their company failed to sell. This talk describes the seller psychologies that can kill exits.

The Psychology of Exits
Presented at the Alliance of Merger and Acquisition Advisors Summer Conference
July 10, 2012 in Chicago

Highlights:

  • What percentage of M&A transactions close after an M&A Advisor has been engaged?
  • According to a speaker from a large multi-national M&A Advisory firm, only 8% end up closing
  • Why do ‘saleable’ businesses fail to sell?
  • Is the fault most often with the Buyers? Or the Sellers? Or the M&A Advisors?
  • Two reasons the Sellers are the most likely cause of an M&A failure:
    1. The business becomes un-saleable
    2. The Seller’s psychology – including some of these common psychological pitfalls:
  • Unrealistic value expectations
  • “It Feels Like I am Selling my Child”
  • “My Business is Me”
  • “I am Still Having Fun”
  • Fear and Greed
  • “I am the Smartest Guy in the Room”
  • Approach Avoidance
  • Cloaked Decision Makers

This is the Powerpoint for The Psychology of Exits.

The Psychology of Exits – AM&AA Summer Conference 2012 from AM&AA on Vimeo.

Preparing to Sell a Company – First Steps in the Exit Process

This is a checklist for the first phase of the exit process. These tasks should all be complete before engaging with the first prospective buyer.

Exit Strategy

  • Fully signed Exit Strategy document
  • If necessary, discuss mechanisms to increase alignment

The Exit Team

  • Engage an external accounting firm for a review or audit – ideally a ‘big four’ firm
  • Engage an M&A Advisor (aka investment banker)
  • Engage an M&A Lawyer – must be an expert in M&A transactions, not a generalist
  • Review board appointments and board composition in the context of an exit transaction

Hitting the Projections

  • Don’t let the exit process distract management from their most important job:
  • Meeting, or hopefully exceeding, the financial projections

Corporate Structure

  • Think carefully about changes to the structure to optimize valuation and tax
  • Review the company Minute Book and Share Register
  • Review minutes from board meetings and shareholder meetings
  • Discuss the ownership structure to ensure optimum tax treatment in either a share or asset sale
  • Review share structures to accommodate tax treatment of any type of purchase price payout
  • Options – particularly problematic under the new tax and accounting laws, tax liabilities can be significant to shareholders or buyers
  • Complete corporate search – PPSA etc. (by the new M&A lawyer)
  • Discuss Articles and shareholders agreement with M&A Advisor and Lawyer – especially in the context of an asset sale

Intellectual Property, Employment, Contractor and Corporate Protection Agreements

  • Review every employee and contractor agreement – especially in consideration of how these laws differ from country to country
  • Conduct an initial patent search – similar to what a US buyer would do during due diligence
  • Software audit – especially for open source code buried in your systems
  • Confirm IP ownership of all forms of IP
  • Patent search for freedom to operate
  • Impact of government grants on IP ownership or transfer

Tax review

  • Best possible review of possible tax liabilities – especially at the US state level
  • Special focus on states where the company may have a nexus
  • Explore tax loss carryforward strategies
  • Discuss SRED implications of possibly becoming a non-CCPC
  • Meet with tax advisors to discuss tax implications of various exit scenarios

Accounting Systems

  • Review internal accounting systems to ensure accurate monthly financials are available within a few days after month end

Financial Model and Projections

  • Financial model with key metrics, and
  • 5 years of history, 3 years of projections, and
  • 12 month current year plan (operating budget)
  • More on the financial model here

Positioning Statement (Elevator Pitch)

  • Develop a one or two sentence description of the business
  • Should clearly state what you are the best in the world at
  • This is a prerequisite to the PR plan and creation of the sales collateral

Public Relations Plan

  • Update the company’s public relations plan to include potential acquirers and the media they are likely to follow (this applies regardless of whether the company will be exiting in stealth mode)
  • Integrate the PR plan with a targeted, tracked email campaign to prospects

Confidential Information Memorandum, etc.

  • Confidential Information Memorandum (CIM)
  • Two page non-confidential executive summary
  • PowerPoint – rehearsed for online presentation
  • Videos – increasingly used as part of the exit process

Due Diligence – all in PDFs for electronic access

  • All financial statements and tax returns including SRED claims
  • Thorough review of any agreements with personal guarantees
  • All material contracts, insurance agreements, etc.
  • Review all contracts for assignability without consent and change of control clauses
  • Sales funnel and CRM remote access
  • Update Org Chart if necessary
  • Trademarks, copyrights, and any patent related documents
  • Business licenses, permits, etc. – especially at the state level
  • Potential litigation (including employee related) or possible liabilities not in the financials
  • Product warranties and support obligations and warranties
  • Leases, guaranties, banking agreements
  • Asset ledger – especially in the context of a possible asset sale
  • Equity confirmations from all current and past employees and contractors
  • Review employee share ownership agreements

Reps and Warranties

  • Start to discuss reps and warranties with significant shareholders – typical terms, limits, periods
  • Agree on who will sign which reps and warranties

New Confidential Email Addresses

  • We recommend starting to use new, confidential email addresses at about the time you engage an M&A Advisor. Gmail for example
  • Our team prides itself on open, honest communications and the absolutely highest ethics in all of our dealings.  We only work with clients with similar standards.
  • But when you sell your business you hand over your corporate email archive
  • About 20% to 30% of the time, there will be some post transaction legal issue
  • The exact translation is disputed, but Cardinal Richelieu is attributed with saying: “If you give me six lines written by the hand of the most honest of men, I will find something in them which will hang him.” That was 350 years before email was invented.