How To Prepare to Sell Your Business: What You Need to
Download
Report
Transcript How To Prepare to Sell Your Business: What You Need to
How To Prepare to Sell Your Business:
What You Need to Know From a ...
Legal Perspective
Markus May
May Law Firm Ltd.
Naperville Financial Center
400 E. Diehl Rd. Suite 130
Naperville, IL 60563
630-864-1004
[email protected]
Introduction
Preparing to Sell Your Business
The Sale Process
2
Preparing to Sell Your Business
Corporate Formalities
– Issue Stock if not already issued
– Minutes regarding Officers/Directors and Past
Actions
Operating Agreement or Buy/Sell
Agreement
Piercing the Corporate Veil
– Run the business to avoid personal liability
3
Preparing to Sell Your Business
Clean up Financials
Perks
Cars
Insurance Payments
Grocery Cards
Make Yourself Dispensable
– Training
4
Preparing to Sell Your Business
Review Key Licenses
Review Intellectual Property Ownership
Patents
Trademarks
Copyrights
5
Preparing to Sell Your Business
Review Ownership of Property
– Title
– Works Made for Hire
Computer Software
Advertising
Art Work
6
Preparing to Sell Your Business
Review Contracts
– Vendor
– Customer
– Lease
Warranties of Work Performed
7
Preparing to Sell Your Business
Worked hard to get here, don't lose it now
Begin Assembling Your Deal Team
– Financial Advisor
– Accountant
– Attorney
– Broker
– Business Valuator?
– Insurance Agent
8
Sale Process
Avoid Surprises
– Disclose, Disclose, Disclose
– Breach of Trust Kills Deals
– Better up Front than Later
– But not too Early
9
Sale Process
Broker Agreement
Set Price and Market Business
Confidentiality Agreement
Letter of intent
Due Diligence
Purchase Agreement
Closing
10
Letter of Intent
Generally Prepared by Buyer
Sets the Terms of the Deal
Get Attorney Involved in Negotiating
– Deal Killer if Change Terms Later
Earnest Money?
11
Letter of Intent
Non-Binding Except Certain Items
Takes Business off the Market
Allows Due Diligence
– Make sure you get what you think you’re
getting
– Adjustments to Deal
– Due Diligence on the Buyer
Earnest Money?
12
Purchase Agreement
Identify the Parties
Identify What is Being Sold
– Stock v. Assets
– Accounts Receivable?
– Liabilities
– Exclusions from Sale
– Some Liabilities Follow
13
Purchase Price
Adjustments
– A/R
– Inventory
– Net Operating Assets
Pro Rations
Allocations
– Form 8594
14
Purchase Price cont.
Payment Terms
– Seller Financing
– Security from Buyer
• Letter of Credit
• Security Agreement
• UCC Filing
Earn Out
15
Representations and Warranties
v. As-Is Sale
Organization and Good Standing.
Enforceability; Authority; No
Conflict.
Capitalization.
Financial Statements.
Books and Records.
Sufficiency of Assets.
Description of Owned Real
Property.
Description of Leased Real
Property.
Title to Assets; Encumbrances.
Condition of Facilities.
Accounts Receivable.
Inventories.
No Undisclosed Liabilities.
Taxes.
No Material Adverse Change.
Employee Benefits.
Compliance with Legal
Requirements; Governmental
Authorizations.
Legal Proceedings; Orders.
Contracts; No Defaults.
Insurance.
Environmental Matters.
Employees.
Labor Disputes; Compliance.
Intellectual Property Assets.
Relationships with Related
Persons.
Brokers or Finders.
Securities Law Matters.
Solvency.
Disclosure.
16
Conditions to Closing
No Adverse Changes
Satisfied with Due Diligence
Buyer Financing
Satisfactory Lease
Franchisor Approval
Big Accounts Follow
Etc.
17
Indemnification
Breach of Agreement or Items Before
Closing
Personal or Corporate?
Set Off
Baskets
Duration
18
General Provisions
Dispute Resolution
Venue
Assignment
Waiver
Etc.
19
Ancillary Documents
Employment Agreements
– Seller
– Key Employees
Promissory Note
Security Agreement
Bill of Sale and Assignment
20
Post Closing
Training
Purchase Price Adjustments
Taxes
Investment of Income
On the Beach….
21
Conclusion
Assemble Good Advisors
Prepare Well and get Good Results
Disclose, Disclose, Disclose
Patience with the Process
22
Markus May, Esq.
Markus May is a client focused business attorney with knowledge in a broad range
of industries. He represents buyers and sellers of businesses and deals with all
aspects of sales including closings, negotiations, drafting letters of intent and
purchase agreements, and entity formation. Mr. May is a frequent speaker on the
legal aspects of buying and selling businesses. He represents business clients as
well as clients who desire to start, buy or sell businesses. Mr. May advises clients
on how to avoid disputes and litigation and how to structure contracts and leases
to minimize risk and maximize future benefits. He has chaired each of the Illinois
State Bar Association Business and Securities Law Section Council, DuPage
County Bar Association Business Law Committee and Chicago Bar Association
Business Law and Mergers and Acquisitions Committees. He has had articles
published on topics related to business sales as well as limiting personal liability
for company actions.
23