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3 Things You Need to Know About . . . Selling Your Privately Held Business

If you are considering, or may in the future be considering, selling your privately held business, you should be aware of at least the following three things, to enhance the likelihood of maximizing the value you receive in a sale.

1.  Learn How Your Business is Valued and Points for Negotiating Value Now

Businesses are valued in many different ways — multiples of earnings, book value or cash flow, to name a few. Learning how a business in your industry is normally valued for a sale can assist you in targeting goals in your business that may ready it for sale — at a maximal price. Understanding now from your legal counsel what is standard in transactions — time limits on representations and warranties you will be asked to give, and caps, deductibles and other limitations on your post closing liability, can assist you in negotiating a deal wherein you maximize the chance of keeping the purchase price you negotiate.

2.  Have The Buyer Sign a Confidentiality Agreement

Your company’s financial and other proprietary information is important to protect. So are your relationships with employees, suppliers and customers. Your legal counsel should prepare and a prospective buyer should sign a confidentiality agreement that will bind the potential buyer and its representatives to safeguard your confidential information and the fact that you are having discussions. You need to ensure that your employees, suppliers and customers learn of a potential sale only from you and only when it is an appropriate time.

3.  The Letter of Intent - Get Your Advisors Involved Early On

Buyers generally ask a Seller to sign a letter of intent, setting forth the structure and some key provisions of the transaction. It is advisable to get your accountant and legal counsel involved before you sign any documentation, even a “non-binding” letter of intent. The tax consequences of how a sale is structured can affect the money you ultimately receive. Savvy buyers generally involve legal counsel in preparing letters of intent. Often they contain what might seem like straightforward language, but may bind you legally or morally to terms that favor the buyer over your best interest. There may also be terms related to maximizing your value or limiting your liability after the sale that are not included in the letter of intent, and should be. Negotiating terms after a letter of intent is signed is more difficult than beforehand when a buyer is trying to strike a deal.

Selling your business is one of the most important events in its and your life. Team with a legal advisor who is experienced in selling companies and “doing the deal”.

About Greenebaum Doll & McDonald PLLC

Greenebaum Doll & McDonald PLLC is a widely respected business law firm with approximately 200 legal professionals in seven offices, serving local, national and international clients in virtually every industry. A forward-thinking business law firm, Greenebaum is committed to the practice of Breakthrough Law®.

To learn more about Peggy B. Lyndrup and her practice, please visit her profile.

  • Partner

    Peggy represents numerous publicly and privately held corporations in U.S. and international transactions. She has over 25 years of experience working with manufacturing and service corporations in corporate and commercial ...

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