Be Careful with Private Equity Buyers. Private equity firms are in the business of buying and selling companies. Accordingly, they are extremely sophisticated and savvy and are often represented by large, aggressive law firms. Deals with private equity buyers are generally more complex than those done with strategic buyers due to, among other things, the level(s) of debt added to the target and/or financial engineering.
Negotiate the Material Terms in the Letter of Intent. As I have previously discussed, your strongest leverage as a seller is prior to the execution of the letter of intent (the “LOI”). This is the time when a solid investment banker will create a competitive environment (or the perception of same), and prospective buyers will be required to compete on price and terms.
Sell Stock (Equity) Not Assets. As a general rule, you should sell stock, not assets, for three significant reasons: First, the potential tax savings if your company is a “C” corporation (allowing you to avoid “double-taxation”). You’ll also pass the company’s undisclosed liabilities onto the buyer. And it generally requires less documentation and less time to close (which means less legal fees).
Continue Reading: “Tips On Selling Your Biz”
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