09 Jan Around the Web: A Week in Summary
A recent article from Divestopedia entitled “Establishing Deadlines in Your M&A Deal” discusses the ways in which missing deadlines as either a buyer or seller can result in unpleasant consequences for the deal.
When a buyer does not meet a set closing deadline, it can be an indication that they’re having second thoughts, they don’t think that there’s much competition, or that they don’t think their offer is competitive. On the contrary, if a seller isn’t diligent on sticking to a deadline, it could queue the buyer in on a lack of other competitive offers, causing the seller to lose their leverage in the deal. Either way, failure to close on the specified date could not only prolong the sale process, it could potentially end in no deal at all.
A recent article from Divestopedia entitled “Consider These Issues When Evaluating ESOPs” explains the five reasons why a small business owner should very carefully consider all of their exit options before choosing an ESOP. ESOPs or Employee Stock Ownership Plans are qualified, defined contribution, employee benefit plans that are regulated by the Employment Retirement Security Act of 1974. Before choosing an ESOP, an owner should consider these five issues:
- ESOPs are complex and expensive
- They have repurchase obligations
- They can fail and create legal exposure for trustees
- ESOPs are difficult to unwind
- They can have difficulty raising equity capital
In certain situations, an ESOP can be an ideal exit plan, in others they can be a nightmare. To avoid the latter, business owners should perform their due diligence prior to entering into an ESOP arrangement.
A recent article from Dover Post entitled “Making Cents: Selling Your Business?” explains the process that businesses should follow in order to find a good buyer:
- Start by cleaning up your financial records. Statements should be either audited or reviewed by an independent firm.
- Make your personnel files more comprehensive to help make a potential new owner more comfortable with the relationships you have with your employees.
- Create an organizational chart showing who is significant to operations and take steps to help ensure that key employees will remain with the company after the sale.
- Get an independent valuation
Being well-prepared for the sale of your business can help to ensure that your business will make it to the ‘finish line’ of the sale process.