With a strong economy, there’s a lot of activity with selling and buying businesses. Sellers and buyers need to be aware of a number of different issues. A list of the top five I’m seeing lately are:
1. The seller and buyer should each designate someone to “quarterback” the process. This person needs to have the time to be fully engaged, respond quickly, and still pay attention to the many details in the process.
2. Each side should set up a meeting or conference call early on in the process with all of the key people involved and their advisers. This can be critical to making sure that all of the parties understand the goals, the expected process, and who is responsible for each part of it.
3. Early on in the transaction, the buyer should work with their legal counsel to decide on the legal structure. Each deal has its differences, but in a typical transaction, the buyer will set up a limited liability company (if they are purchasing real estate) and a LLC or a corporation to purchase the operating assets. This is a mistake I see fairly often and can cause some challenges if it’s started too late.
4. All parties need to be focused on the due diligence and not just the buyer. Sellers can naively believe that only the buyer needs to focus on this. This should ideally be the case. However, it will be a problem if the buyer does not realize an issue until the last minute and this can jeopardize the entire deal.
5. If the parties are stuck, they should consider having a call with the seller, buyer, as well as their attorneys. Often times, communication issues can develop and cause road blocks with the deal. Having an “all hands on deck” to work through the issues.
Selling or buying a business is a very complicated process and parties on either side should give proper time to plan and think through how they were going to move through a transaction. If I can be of any assistance, feel free to contact our office.