DWH and Adamy Valuation began a series called “Tactical Tuesdays” in 2020 in response to the impact of the COVID-19 pandemic on our clients and business partners. The goal of “Tactical Tuesdays” was to provide up-to-date information that would allow leaders to make tactical decisions to run their business. As COVID (hopefully) winds down, the Tactical Tuesdays focus is shifting to address longer-term issues. Over the next several weeks, DWH and Adamy will be publishing a series of blog posts around exit planning for business owners.
As we have covered in previous articles in this Tactical Tuesday Exit Planning Series, having an experienced team of advisors is critical to the sale process for any business owner. Let’s look more closely at the role a mergers and acquisitions (“M&A”) attorney can play in the process. Here are five ways an M&A attorney can help business owners before and during the sale of a business.
- Prepare the Company
A good M&A attorney will assist business owners with reviewing their legal documents before beginning the sale process. The attorney will review ownership documents, leases, employment contracts for key employees, customer contracts, and other key legal agreements. This prevents the business from getting into the sale process and finding out a critical document is missing or has been misrepresented, which can impact the sale price or even end the sale entirely.
- Present Pros and Cons
During the sale process, owners will see many options for deal structures. M&A attorneys have experience with these structures and can advise business owners of the pros and cons of each type. This is very important when an owner is comparing offers with different proposed structures or financing terms.
- Mitigate Tax Issues
Similar to #2, M&A attorneys have experience working with CPA firms or tax attorneys on setting-up the most tax-efficient structure for sellers. Many business owners focus on the offer price, but all offers should be evaluated on an after-tax basis. The attorney will work with the business owner’s CPA or tax attorney to determine this.
- Protect the Owner
Purchase agreements generally require the owner to agree to certain representations and warranties. Purchase agreements and representations and warranties are legal agreements designed to protect the buyer from things not found in due diligence, such as undisclosed lawsuits or environmental issues, but can create risk for the seller. M&A attorneys assist owners in negotiating reasonable representations and warranties that can protect the buyer but not create unnecessary risk to the seller.
- Advise and Advocate
M&A attorneys work on the sale and purchase of businesses all the time; it’s their job. As a result, they have the skills and experience to provide practical advice to business owners and serve as a trusted advisor and advocate during the transaction process. “An experienced M&A attorney brings their personal M&A experience, and the experience of their firm, to bear on the transaction,” says Jon Siebers, Business Practice Group Chair at Rhoades McKee, in Grand Rapids, MI. “This allows the attorney to quickly advise the client on the best solution to the problem they are facing in a transaction.”
M&A attorneys play a critical role in the sale process of any business. Business owners must take the time to find an attorney that has extensive experience, particularly with the type of sale the owner is contemplating. This will ensure that the owner has a qualified advocate to guide them through the sale process.
- Having an experienced team of advisors is critical to the sale process for business owners.
- M&A attorneys play an important role in preparing the company for sale, presenting pros and cons of deal structures, mitigating tax issues, protecting the owner, and advising and advocating for the owner during the process.
- Owners should make sure that their attorney has experience advising on similar types of transactions before engaging them.
The Complete (6 part) Exit Planning Series
Part 1: Are you Ready to Make an Ownership Transition?
Part 2: Preparing for the Future: Understanding the Value of Your Business
Part 3: Proactive Estate Planning When Preparing a Business for Sale
Part 4: Exit Options for Business Owners
Part 5: Should you Establish and ESOP at Your Company?
Part 6: Five Ways Attorneys Help Business Owners Through a Sale
Ben Borisch, COO, Partner, DWH
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