Episode 29
Closing Adjustments
Sometimes learning makes you come up with more questions than answers. In episode 8, we discussed how working capital is often included in a transaction. You may have already recognized a problem. Working capital is changing on a daily basis. How is that accounted for in a business transaction? Here, we talk about closing adjustments to answer that question.
Episode 28
Holdbacks
Sometimes, a portion of the purchase price may not be received right away. We’re not talking about promissory notes and earn - outs. This episode discusses how some of the cash portion of the purchase price may end up in an escrow account at the close of a deal. Here, you’ll find out why, how much may be held back, and how long of a holdback is normal.
Episode 27
Covenants
The last couple of episodes have explored some of the legal components of a transaction. A natural next step is to discuss covenants. What are they? How do they fit into a purchase agreement? Are they positive or negative? Watch to find out.
Episode 26
Reps & Warranties Part 2
In Reps & Warranties Part 1, we discussed how this section is the basis for disputes. We left off asking the questions, for how long can a buyer go after the seller? And for how much? We’ll pick up on that discussion here.
Episode 25
Reps & Warranties Part 1
There is more to a purchase agreement than the financial terms. In fact, a greater negotiation to the purchase agreement may occur around the representations and warranties. Find out more about what Reps & Warranties are and why they’re important here.
Episode 24
Escrow Process
Escrow plays a key role in a business transaction process. But, what do they do? Is a third-party escrow required? You’ll find out here.
Episode 23
Managing Confidentiality
While working through a transaction, most owners are concerned about employees, customers, and vendors finding out that the business is for sale. Here, we talk about how confidentiality is typically managed in a business transaction.
Episode 22
Due Diligence
The topic of due diligence is a nebulous concept until you’ve been through it. Here, we discuss the process it serves, a variety of issues a buyer might dig into, and the timelines a seller should expect.
Episode 21
Selling to a Financial Buyer
We’ve spent the last two weeks discussing the sale to owner operators and strategic buyers. Today, we’re going to dive a little deeper into selling to financial buyers. These typically represent private equity groups and family offices.
Episode 20
Selling to a Strategic Buyer
The focus in this episode will be on some of the nuances and considerations of selling to a buyer that is in the same industry or on a peripheral industry as the seller, also known as a strategic buyer.
Episode 19
Selling to an Owner Operator
We mentioned last time that there are three types of buyers and that each may evaluate a business differently or have restrictions on how they value and structure deals. Here, we examine some of the intricacies of selling a business to an owner operator.
Episode 18
Three Types of Buyers
When selling a business, there are typically three different types of buyers. These buyers have different levels of sophistication, different access to capital, different needs and will likely all evaluate your business differently. It’s important to understand who these types of buyers are and the most logical to acquire you so that the right levers can be pulled when preparing for a sale.
Episode 17
Qualified Small Business Stock
Sometimes, being a C-Corporation can be a really good thing. There are very specific rules to fall under the category of Qualified Small Business Stock (QSBS), but for those that do, the tax benefits are tremendous. Speak to your CPA to see if your business meets the requirements before going to market.
Episode 16
Taxation in a Stock Deal
The taxation of a business transaction is the easiest to understand in a stock deal because it’s mostly aligned with what we’re accustomed to seeing in the stock market. Learn more here.
Episode 15
Converting from a C-Corporation (The built-in gain)
Can a C-Corporation convert to an S-Corporation to avoid the double taxation in a transaction? That depends on how much time you have. Federal and state authorities have different rules surrounding the timeline of your conversion and neither are pretty.
Episode 14
Taxation of a C-Corporation in an asset deal
Main street businesses set up as C-Corporations should raise a flag for any advisor to the company. There may be great reasons to be a C-Corporation and even great tax benefits. However, others will face a double taxation in a transaction. In this episode, we discuss the negative impact of taxing a C-Corporation in an asset deal.
Episode 13
Taxation of Flow Through Entities (S-Corps, LLCs)
The taxation of a business transaction is dependent upon the type of entity and whether a transaction is structured as an asset or stock deal. Episodes 11-12 are a great place to start if you don’t understand those two topics. Here, we discuss the taxation of flow-through entities in an asset transaction.
Episode 12
Asset Versus Stock Deals
In order to discuss how businesses are taxed in a transaction, we have to first lay some groundwork by identifying the difference between asset deals and stock deals.
Episode 11
Entity Structures Matter
The choice of entity structure impacts how a business is taxed while operating and how it’s taxed in a business transaction. In this episode, we discuss some of the key differences between LLCs, S-Corporations, and C-Corporations.
Episode 10
Customer Contracts
Reviewing customer contracts is a regular component of due diligence. The length, pricing, and assignability of agreements can have a material impact on how the continuity of revenue is viewed. We explore this topic and more in Episode 10.
Episode 9
Landlords & Leases Impact Deals
Landlords can kill deals and a company’s short and long term plans should be considered every time a lease comes up for renewal. In this episode, we talk about a variety of issues that should be considered when entering into a lease agreement shortly before taking your business to market.
Episode 8
Working Capital In A Transaction
Working capital is one of the most misunderstood components of managing a business and in negotiating business transactions. Here, we talk about the cash conversion cycle and how keeping tight working capital controls allows the owner to extract additional value from the business.
Episode 7
Clean Financials - Part 3
Having sound and consistent procedures around when revenue and expenses are categorized sounds so simple. Yet, client pre-payment of revenue, business pre-payment of expenses, and the management practices around inventory, accounts payable, and accounts receivable creates regular and serious issues in evaluating financials.
Episode 6
Clean Financials - Part 2
Consolidating multiple business units or locations into one set of financials is the easiest and cheapest way to set up and maintain a financial system. But, it makes it harder to make good business decisions in the short run and for buyers to analyze your business in the long run.
Episode 5
Clean Financials - Part 1
The number one issue that kills business transactions is poorly kept financials. There are enough things to talk about that we’ve broken up the topic into three episodes. Here, we’ll talk about the categorization of your expenses from year to year along with discretionary expenses run through the business.
Episode 4
Understanding Valuation Multiples
What are valuation multiples? Why are they used? What are their limitations. Find out here to tie together Episodes 2-4.
Episode 3
Differentiating between key financial metrics
This tutorial will differentiate between EBITDA and Seller’s Discretionary Earnings (SDE) and help us identify situations where one may be appropriate over another when valuing a business.
Episode 2
How does Business Valuation Work
Valuing a business is more of an art than a science. Before trying to talk about formulas or rules of thumb, it’s important to understand the basic premise underlying business valuation.
Episode 1
Selling a business is a process, not an event
If you’re considering a sale of a business, you’ll quickly realize that the money is made during the planning stage. Here, we set the stage for our video series to help owners set themselves up for success in a transaction.