Expensive Mistakes When Buying & Selling Companies

Expensive Mistakes When Buying & Selling Companies

Richard G. Stieglitz PhD, Stuart H. Sorkin JD LL.M CPA

Language: English

Pages: 232

ISBN: 0982050062

Format: PDF / Kindle (mobi) / ePub

Selling or buying a business can be a lucrative but risky transaction. It's all too easy to sell yourself short or to overpay as the buyer. If you want to avoid the costly mistakes that many business owners make in M&A transactions, this book is for you. It provides valuable guidance on how to prepare for and negotiate your deal, and how to leave the bargaining table with more money in your pocket!











your biggest problem tomorrow?” Their responses were unexpectedly passionate and varied. The issues were compiled in a written plan. In addition to expected concerns about Dick’s relationships with Board members, bankers, key customers, and strategic partners, they were worried about: • Lack of written procedures for project and financial management, • Personnel policies that were outdated and often not followed, • The ad hoc nature of decisions about pricing, hiring and salaries, • Erratic

diligence and negotiating the Purchase & Sale Agreement were stressful for Dick, as they are for most sellers. The original exclusionary period was 60 days, but it was extended twice during the five months from LOI signing to closing. The company missed its sales projections by twenty percent, revenue growth slowed, and profit dropped from over ten percent to near zero. The executive team had immersed themselves in the deal and taken their collective eye off directing daily operations. Dick and

secure the financing required to close the deal. On the other hand, if your company is smaller than other buyers, you will want to tout your management agility, a better cultural fit, how close your executives are to employees and customers, and less red tape in closing the deal. If your financing is secure, show the commitment documents to the seller. Your large-company competitors actually may provide evidence during LOI negotiations to prove your point that a small company is a better, less

detailed exit strategy, rather than a vague notion that some day he would sell the business and sail happily into the sunset. In both cases, he would have been required to remain with the company after the sale. But Dick knew he didn’t have the desire or personality to be an employee in his former company. In addition, he and his wife knew when they wanted to start retirement and how much they required from the sale so Dick no longer had to work. With professional help, he developed and executed

we retire?” His same-store sales increased 12 percent in 2007, but were flat in 2008. Early in 2009, he put the stores on the market expecting to receive roughly the 2006 valuation. His broker advised that market values had dropped substantially - to which he said: “I’ll get my price even today!” After conducting a limited auction, the best offer was 25 percent lower than the 2006 valuation. It’s not unusual for the gap between the buyer’s offer and seller’s expectations to be near ten percent -

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