Deciding to sell your business is one of the most important decisions you’ll make as an entrepreneur. Before you even have an offer on the table, you should decide how much you are willing to sell for, whether you want to (or are willing to) be involved in day-to-day operations for some period after you sell and prepare your books and records for a lengthy due diligence process.
A Priori acquisitions lawyer can guide you through the process of selling your company from the first moment you are considering selling to vetting the offer, conducting due diligence and negotiating the sale.
Business valuation is, obviously, a sticking point in many acquisitions. Here are some of the ways in which businesses are commonly valued:
- Asset valuation. Asset valuation is calculated by the value of assets plus their improvement costs and inventory value (raw, in progress and finished goods). This method is commonly used in manufacturing business valuations.
- Capitalization of income. This includes the value of discretionary items such as the business client portfolio, expertise and skills, debit/credit portfolio, profit and loss trends and location of the business. This method is primarily used for service related industries.
- Market valuation. Market valuation is determined by comparing the average sales figures across the industry to the average sales figures of your business.
- Brand valuation. This determines estimated future economic benefits based on market competitiveness and costs for continued creation and promotion.
Moving a business from one owner to another is a complex and challenging endeavor and how and when you pull out of the business can have a significant effect on the success of the business going forward. An experienced acquisitions attorney can help guide you through the exit and integration strategies that will be most beneficial to the business.
A critical consideration may involve staying on with the new company for a set period of time to lend your expertise and help with the transition. Even if you don’t stay on, the determination must be made as to when you will pull out of the business and how you will do it in the most organized and profitable manner. Your acquisitions lawyer can help you determine if staying on will increase the value of the company for a buyer and if it is worth your time to do so.
In the context of an M&A transaction, a business broker engagement agreement will set out terms for the exclusive representation of the business owner selling their business. You can download a free template of this agreement in Priori's Legal Document and Form Learning Center.
In order to ensure a smooth transition, it is imperative to take care of some housekeeping issues early in the acquisition process:
- Having clean and clear documentation of ownership
- Making sure you don’t have any accounting errors, which can be detrimental to the sale of the business and the success of the venture going forward
- Understanding ownership of intellectual property, which can be tricky especially when dealing with ideas and software
Depending on the deal, pricing can vary widely. When you hire a lawyer in the Priori network, hourly rates for this type of transaction can typically start at $225 per hour but range significantly higher based on certain types of experience. In order to get a better sense of cost for your particular situation, put in a request to schedule a complimentary consultation and receive a free price quote from one of our lawyers.
Frequently Asked Questions
How can an acquisitions lawyer help with selling a business?
An attorney that specializes in the acquisitions process can help guide you through due diligence, business valuation, devising your exit strategy, as well as your role in the integration of the company. Your attorney will know the federal, state and local laws that apply to business acquisitions and mergers, as well as the legalities of viable proposals and purchase agreements.