Why are you selling the business? Are you the only “seller”? Do you have partners? Does your team share the same vision?
Any agreements (shareholder agreement, operating agreement, partnership agreement and the like) that might deal with the sale of your business need to be considered. Who needs to agree to the sale? What are each of your rights and obligations? How do you share the sales price? Even in the absence of a written agreement, relationship issues need to be considered. Ensuring that everyone on the selling side has the same vision of what selling the business means is sometimes especially challenging in a family-owned business, even when only one member of the family is actively involved in the operations. Had grown children intended to join the business? Does Uncle Joe need to continue to work? Are you intending to retire, or do you want to maintain some ongoing relationship with the company? Is timing important? Are you going to want a buyer who will display loyalty to your employees and the community and will be a good steward for the business into the future? Understand where you are willing to compromise and where you won’t. Ensure that everyone on the selling side has a shared vision of the end state of the deal.
Once you fully understand all of the objectives of your transaction and have prioritized those objectives, you should try to attract the type of buyer who best meets your goals for the sale. Strategic buyers and financial buyers have very different motivations. Small buyers have different plans and needs than bigger buyers. Private buyers are, of course, different from public buyers. Knowing exactly what you are selling and the relative value of each of the components in the transaction will ensure that you are positioning your business optimally for the type of buyers you want to attract.
How will you structure your transaction? As a stock deal? As an asset deal?
How your deal is structured can impact your profits from the transaction. Tax and liability issues are often, but not always, the driving considerations in structuring a transaction. Most deals can be structured as either a stock or an asset deal, and the form will impact the benefits to each of the parties. In a stock transaction, the business entity itself is transferred with all of its assets and liabilities. In an asset deal, the buyer is able to select only those assets and liabilities it wants to assume, subject to some exceptions. In the sale of a family business, the ability of the buyer to set apart assets and liabilities may be more theoretical than real, as you likely will want to transfer the entire enterprise. Reverse due diligence will help your advisers determine the best arrangement for the transaction.