A Checklist of Major Buy/Sell Considerations

No two deals are alike. However, it’s useful to at least think about the following items when shaping and negotiating a deal.

1. Finding the buyer or seller

a. Networking, professional and social

b. Competitors

c. Business brokers

d. Investment bankers

2. Useful professionals

a. Lawyer

b. Accountant

c. Investment banker

d. Tax advisor

3. Before serious negotiations and discussions begin, consider

a. Entering into a confidentiality agreement

b. Requiring no communication with customers, clients and employees about the possibility of a deal – to avoid damaging relationships

c. Agreeing not to “shop” the deal elsewhere

4. Identify what’s being bought and sold:

a. Book of business

b. Entire firm

c. Certain customers or clients only

5. Asset vs. equity purchase and sale

6. Valuation

a. Negotiated

b. Multiple of revenue, EBIDTA or something else

c. Third party appraisal

7. Letter of intent—non-binding, but useful to set out parameters of deal

8. Non-disclosure agreement

9. Purchase and sale agreement.

a. Purpose:

i. To memorialize agreement

ii. To create road map for closing

iii. To govern in case of dispute

b. Some contract terms

i. Representations and warranties

ii. Covenants

A. Seller not to solicit old customers or clients

B. Seller not to compete?

C. Seller to help transition customers or clients

D. Seller continuing as consultant

E. Need for key personnel at seller to continue

iii. Payment options

A. Cash down

B. Earn-outs

C. Equity as payment

10. Consider approvals needed

a. Board

b. Equity owners

c. Lender

d. Contract partners

11. Financial due diligence

a. Financial statements

b. Tax returns

c. Extraordinary or non-recurring revenues and expenses

d. Excess owner compensation and benefits

e. Undisclosed liabilities

f. Strategic and value-added components

g. Reductions or additions for contingent events

h. Tax consequences of transaction

i. Allocation of purchase price

12. Some other major items of due diligence

a. Principals’ and key employees’ financial and personal background

b. Books and records

c. Past and present litigation

d. Past and present regulatory actions

e. Intellectual property

f. Tangible assets

g. Evaluation of operations

h. Evaluation of customers or clients

i. Environmental audit (if physical plant being acquired)

j. Evaluation of employees

k. Lien searches

13. Availability of financing

14. Necessary filings and approvals

a. Regulatory

b. Bulk sale

c. Contractor and creditor approvals

d. Antitrust (Hart-Scott-Rodino)

15. Closing

a. When and where

b. Contingencies

16. Post-closing

a. Transition of customers or clients, including assignment of customer or client agreements

b. Transition of management

c. Retention of certain of Seller’s employees

d. Possibility of maintaining Seller’s office

e. Updating of business continuity plan

f. Updating of succession plan

g. Regulatory follow-up

Please feel free to contact me, if you have any questions or comments.

Alan N. Walter, 973-937-8636, alan@waltercounsel.com, www.waltercounsel.com

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