What Does the M&A Process Look Like?

Small Business Tax Savings Podcast

Are you ready to learn the In’s and Out’s of selling a small business? On this episode of the Small Business Tax Savings Podcast, we welcome back Stuart H. Sorkin from Business and Legal Advisors to discuss how to eventually exit from your business. This is part two of a two-part series where he discusses why owners exit their business and how to best prepare for it.

Stuart H. Sorkin discuss how to best prepare for an exit from a business. He tackles topics such as separating lifestyle businesses from other types of businesses, creating a management team, and handcuffing key employees to ensure the success of the M&A process.

This conversation provides insight into the due diligence process for selling or buying a business and the importance of finding a professional with experience in mergers and acquisitions. He discusses the important of an LOI when negotiating an acquisition and some key points for sellers to consider, such as warranties, taxes, liabilities, and post-acquisition services Tune in now to learn more about planning for your eventual exit from your business!

[00:01] Critical Considerations For A Successful Acquisition

• Creating a business that has value and can go beyond the owner
• The difference between a lifestyle business and other types of businesses
• Delegating decisions to create a management team
• Selling a business as an absentee owner

[05:15] Navigating The Complexities Of The Due Diligence Process In Business Deals

• An Overview of the M&A process
• A Letter of Intent (LOI) is a non-binding document outlining the transaction
• Sellers should specify an amount related to the covenant not to compete
• Golden handcuffing key employees in advance can prevent “deal failure”

[11:16] Maximize Your Return And Minimize Risk

• It is important to seek professional counsel prior to signing an LOI
• An LOI may include an exclusivity clause, where the seller cannot talk to anyone else while due diligence is taking place
• Cashless transactions are becoming more common, where the seller gets equity instead of cash

[15:03] Understanding The M&A Process

• Sellers should not hide anything during the process as it could come back to bite them
• It is important to find a professional who understands M&A work to protect yourself and maximize return
• Tax planning should be done before the deal closes in order to maximize tax strategies

[17:59] Closing Segment

• Final words

Key Quotes

“The point is that you're going to negotiate… There's usually an exclusivity clause that says you can't sell while I'm doing due diligence. You can't even talk to anyone else during due diligence. So, if the deal falls apart, you got to be ready. You've also been off the market for a period of time.” – Stuart H. Sorkin

Resources Mentioned

Connect with Stuart:

• Stuart on LinkedIn
• Business and Legal Advisors Webpage

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Podcast Host: Mike Jesowshek, CPA - Founder and Host of Small Business Tax Savings Podcast

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