done deal! buying or selling a business samuel i kreamer j.d.,c.p.a. attorney at law 7155 lake...
TRANSCRIPT
DONE DEAL!Buying or Selling a Business
SAMUEL I KREAMER J.D.,C.P.A.
ATTORNEY AT LAW
7155 LAKE DRIVE, SUITE 200WEST DES MOINES, IA 50266
Contact Kreamer Law FirmBy Phone: (515) 727-0900By Email: [email protected]
Identifying an opportunity How to avoid pitfalls What the process looks like Pricing the transaction Structuring the transaction
DONE DEAL!OVERVIEW
Contact Kreamer Law FirmBy Phone: (515) 727-0900By Email: [email protected]
Changes in industry Family changes Retirement Illness Buyer with money willing to pay too much
Identifying an Opportunity
Reasons to Sell
Contact Kreamer Law FirmBy Phone: (515) 727-0900By Email: [email protected]
Identifying an Opportunity
Reasons to Buy
Strategic Passion Experience Seller underpricing
Contact Kreamer Law FirmBy Phone: (515) 727-0900By Email: [email protected]
Unrealistic expectations Due diligence on buyer Over reliance on history (balance sheet) Understanding buyer motivation Premature announcement
Seller: How to Avoid Pitfalls
Contact Kreamer Law FirmBy Phone: (515) 727-0900By Email: [email protected]
Experience Difference between employee and owner Difference between a business and a job Over reliance on history (P&L) Over reliance on internet
Buyer: How to Avoid Pitfalls
Contract-Engagement– Fully sets out the terms of the transaction– Representations and Warranties
Establish the legal liabilities of the Parties Limitations
– Knowledge– Materiality
Length of time– No “standard”– 10 year limitation on written contract– Not all need have same limit
Most problems become apparent in first 24 months Consider liquidated damages provision
Closing-Marriage
What the Process Looks Like
The Marriage Analogy
Meeting• Identify an opportunity
Dating• Confidentiality
Agreement
Exclusive dating
• Letter of intent
Engagement• Contract of
sale
Relationship• Due diligence
Marriage• Closing
Contact Kreamer Law FirmBy Phone: (515) 727-0900By Email: [email protected]
What the Process Looks Like
Timing
0 - 30 Day
s
• Confidentiality agreement
30 - 45 Day
s
• Letter of intent
60 Day
s
• Contract
90 -120 Day
s
• Completion of due diligence• Preparation of closing documents
• Rule of thumb
Contact Kreamer Law FirmBy Phone: (515) 727-0900By Email: [email protected]
Internal– Contracts– Employees– Assets
What the Process Looks Like
Due Diligence
External– Customers/vendors– Liabilities search– Approvals
Contact Kreamer Law FirmBy Phone: (515) 727-0900By Email: [email protected]
Lawyer: Negotiation/documentation CPA: Due diligence Banker Consultants
– Employee Benefits– Insurance
What the Process Looks Like
Team
Contact Kreamer Law FirmBy Phone: (515) 727-0900By Email: [email protected]
Pricing-Factors– Type of Business
Asset centered business Service centered business
– History Profitability Reputation
– Barriers to entry
Pricing the Transaction
Contact Kreamer Law FirmBy Phone: (515) 727-0900By Email: [email protected]
Structuring the Transaction
Payment at closing
Seller “carry back”
Consulting Agreement
Non-compete Agreement
Leasing “Earn-out”
