Maximizing the Value of Your Deal: Prepare!

Selling a company requires the same level of planning that any other business activity requires.  With advance planning, you’ll be able to significantly increase the post-tax value of a transaction.  Surprisingly, many of my clients don’t start the planning cycle until it is too late.

mmx_logoLast week, Middle Market Executive published the second in my series on the Inner Workings of a Deal, entitled “Preparing for a Deal: What to Expect When You’re Expecting.”

While my full advice can be seen in the article, the upshot is that the more you institutionalize your company, the more value it will have.  There are three main areas in which this can occur:

1.  Management Infrastructure:  Institutionalize the management team – make it able to function independently of the ownership group.

2.  Financial Reporting:  Understand the performance of your company from the perspective of a buyer.  Make sure you have a competent CFO or Controller (not just a book keeper) and have implemented GAAP financial rules.

3.  Performance Metrics:  Understand where your profit comes from.   Implement and monitor key metrics.

Also, you should plan for the tax effects of a sale:

1.  Company Tax Planning:  Consult with an accountant with significant M&A experience to ensure that a transaction will have as low a tax impact as possible.

2.  Personal Tax Planning:  Hand in hand with company tax planning.  Review ownership options to minimize tax impact.

3.  Estate Planning:  Finally, plan for the future of your family.  There are a variety of tools that you can implement in advance of a transaction that can maximize value.

Please don’t wait to plan!


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