HPE Miami 2023 | Preparing Your Company for a Transaction

Key takeaways included:

1. Connecting with an investment banker is one of the most important steps a founder should consider when preparing for a sale. Investment bankers can help founders identify the right set of advisors for their company’s situation. They can also serve as a sounding board, provide comparisons to past deals and act as guides throughout the transaction’s pre-marketing, marketing, diligence and closing stages. An investment banker can help shoulder some of the transactional workload and provide valuable touchpoints throughout the deal process.
2. Most buyers expect a sell-side quality of earnings analysis. A sell-side quality of earnings analysis allows founders and their advisors to identify areas of value and potential risks early in the diligence process, and as such is one of the most important aspects of a due diligence process. Not passing the buy-side quality of earnings analysis and other finance-related issues are among the most common reasons that deals do not close.
3. Founders should think about maximizing tax efficiency as early as possible. Founders are in the best position to create tax efficiency for future transfers before the deal starts, ideally a year or two before the sale process begins. Engaging an estate planning lawyer early can allow a founder to maximize the use of their gift tax exemption.
4. Negotiation of the letter of intent is typically the moment in the transaction when a founder has the greatest leverage. Having a lawyer review the letter of intent and discuss key terms such as rollover equity can help founders to fully understand and effectively negotiate key deal terms.