AKA, Selling Your Business
The demographics are dramatic: tens of thousands of owners of successful businesses in Ontario are dying to sell their businesses – or should I say, they want to sell before they die? They want to hit the road (Cattenda Via! in Italian) to capitalize their gains, provide for their secure, happy retirement and a nice legacy for their family, even if none of the kids are taking over the reins of power.
If you are in the demographic of retiring owners, then this blurb just might interest you. I provide a short list of key steps to making this happen from the perspective of a very seasoned (white haired) SME M&A lawyer. Here it is:
- it takes a very long time – as much as 30 months from start to closing of the sale.
- you must have a plan – that is, a written plan. If it’s not in writing, it’s just another fleeting idea. Ideas are cheap.
- you need a qualified, independent team – mainly, a competent corporate/commercial lawyer and a tax-savvy accountant, and maybe, an honest broker. Using dabblers or generalists, family retainers, or worse, sycophantic cheerleaders, will not work for you.
- clean it up good – the Minute Book, all legal and financial matters, tax filings, payment of any arrears, litigation, lease issues (renewal, tenant improvements, rent adjustments), employee problems. Make it all shiny, eliminate any squeaks, warts, skeletons.
- simplify things – like debt, related party transactions, ownership structure. Butterfly out real estate or passive investments as per tax advice.
- get an independent valuation – so you acquire a realistic expectation as to price and terms. A business is worth only what someone else will pay for it in the time period you have to close a deal, just like selling your house. It doesn’t matter how much you need or want.
- understand and protect your two overwhelming priorities – getting paid ASAP and eliminating/limiting lingering obligations and liabilities, the extent you and your expert team can negotiate. Get a worthwhile deposit and avoid onerous, complicated earnouts & working capital holdbacks. Don’t fall prey to the ‘bait & switch’ of a high price that is made subject to tough restrictions and adjustments – that’s the game the big boys play lately.
This list is just the start. Attack the sale of your business with the same sharp focus and high energy as you would your best new deal. You’ve worked very hard to build your business, so you deserve to have it done right.