Mergers and acquisitions
Preparing Your Business for Sale: The Two-Year Exit Plan
Whether you are running an established business or a growing startup, the ultimate goal for many owners is a successful exit. But selling a business is rarely as simple as finding a buyer and signing a contract. To maximize your valuation and ensure the deal actually closes, you should begin the preparation process long before you receive a letter of intent (LOI). This article discusses what I will call the "2-Year Rule" for maximizing the value of your business and assuring a smooth transition. Don’t wait for the LOI to start your preparations. Assemble a team of advisors, including legal, financial, and M&A experts, to guide the process comprehensively.
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Why Asset Deals Dominate Small Business M&A—and When Stock Deals Actually Make Sense
In the purchase and sale of small and medium‑sized businesses, deal structure often matters as much as price. Buyers and sellers may reach agreement on headline valuation, only to discover that how the transaction is structured dramatically affects taxes, risk allocation, and whether the deal works at all. Most closely held businesses are sold through asset deals, not stock deals. That pattern isn’t accidental. Asset purchases give buyers cleaner risk profiles and better tax outcomes, which in turn helps support higher valuations. Understanding why asset deals dominate, why stock deals are usually discounted, and how modern hybrid structures bridge the gap is critical for business owners, buyers, and advisors navigating a transaction.
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Navigating Business Acquisitions: Key Legal Insights
Buying a business involves a complex process with distinct phases: preliminary negotiations requiring NDAs and high-level financial reviews, a strategic letter of intent (LOI) to address deal-breakers early, thorough due diligence covering legal, financial, operational, and customer aspects, finalizing purchase agreements with auxiliary documents like disclosure schedules, and post-closing management of financial adjustments and transition services. Each phase is critical to ensuring a successful transaction.
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Business Acquisition: Key Takeaways
Part 2 on buying a business. In this part of the series, the buyer reflects on his unsuccessful quest to purchase a small existing company. He shares some suggestions for how to increase the chances of buying a business. He suggests dealing directly with sellers rather than brokers, setting up funding early, and seeking mentorship instead of paying for promises of success. Ultimately, this buyer did not purchase a business due to mismatches between his criteria and available options in his price range.
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Buying a Business: Challenges Abound
Trying to acquire an existing business is not a sport for the short-winded. This is the first part of a two-part article on the challenges of buying a small business. I represented a prospective buyer for eighteen months, before he decided to give up the hunt. This article highlights key lessons learned from his experiences and observations about business acquisitions. The buyer's journey to acquire an existing business faced numerous challenges that ultimately derailed his efforts. This part of the article details the criteria that the buyer used to search for an existing small business: a business priced between $1-2 million that met criteria around risk, growth potential, transferability, and documentation.
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Sale of a Business: Goodwill
If you are buying a small business, the price that you are willing to pay is usually more than book value. The premium associated with the purchase price over the assets is generally considered the goodwill of the company. The amount of goodwill may affect the tax burden on the buyer and seller. It may also influence the ability of the seller to compete after the transaction. This article discusses goodwill in sales of small businesses.
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Sale of Small Businesses: Asset vs. Stock Purchases
This article summarizes the two main structures in purchasing a small business: asset purchases and stock purchases. Each has its advantages and disadvantages. Spoiler alert: in general the buyer favors an asset purchase, and the seller favors a stock purchase. The structure of purchasing a business is a major point of negotiation. Which road you travel will affect other critical issues such as the purchase price and timing of the transaction. Although the structure can be changed, the parties should consider and address the structure of a sale of a small business at the time that they negotiate a letter of intent. For most purchasers of small businesses, asset purchases are more advantageous. They provide greater safety in terms of liability and have tax benefits that stock purchases do not. There are limited…
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NDAs: Who Do They Protect?
If you have started your business, you have no doubt been confronted with the ubiquitous non-disclosure agreements. These agreements are not all created equal and you should review the NDA carefully and consult your small business lawyer to understand what they protect and what they don’t. NDAs or sometimes known as confidentiality agreements can arise in numerous contexts. Maybe you are trying to keep an employee from disclosing proprietary information about your small business. Maybe you are creating a custom software solution for your customer, who doesn’t want to share any of its information without an NDA. Or possibly you are in the process of selling your small business to a competitor or large company, and you think that the NDA will provide a modicum of assurance that your precious list of customers will…
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Business Acquisitions in US: CFIUS Reviews Expanding
If you are a foreign company and have loads of money to purchase a U.S. business, the U.S. has generally welcomed your foreign cash. But there are limits regarding the kinds of businesses foreign companies are allowed to acquire. This article provides an overview of The Committee on Foreign Investment in the United States (CFIUS) and its role in reviewing transactions in which a foreign company is buying an interest in a U.S. company. The number of transactions that have to comply with CIFIUS’s notice requirements has increased significantly in recent years and the trend is expected to continue.
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Lessons from Failed Business Acquisition
Half of acquisition deals close. The other half don't. I recently represented a client in a transaction in which the deal died. She offered to share lessons learned from an unsuccessful acquisition. In this article, she has given us four lessons learned from the ultimately unsuccessful negotiations. These are the four major lessons she wanted to share with other potential purchasers of small businesses: lesson 1: seek legal guidance early on; lesson 2: be specific about due diligence requests; lesson 3: early misalignment is a sign of the future to come; and lesson 4: better understand certifications for government contractors.
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