Seller Checklist for Planning a TransactionS AMP L E

According to IMAP M&A Insider, 75% of all mergers and acquisitions fail to achieve their financial and strategic objectives. What can you do to maximize or exceed your objectives?

The Forbes M+A Group offers Exit Optimization™ advisory services to assist business owners to best position for future sales at the highest possible values. As a starting point, below is a sample checklist for planning.

TIMING

Establish and prioritize your personal objectives:Speed of Sale, Confidentiality, and Price: Understand the trade-offs, and determine which 2 are most important.

Get “Deal Ready”Understand internal vs. external transaction options.Establish and prepare your internal deal team.Prepare and organize due diligence files (see next section).Assess the company’s legal readiness for a transaction.Establish and periodically review personnel policies.Get good advice on tax strategies that make the business more attractive to buyers and maximize your after-tax proceeds.

Understand market timing:Keep your finger on the pulse of the deal market in your industry and region.Start building relationships with the right advisors for your external deal team.Periodically meet with advisors (at least annually) to assess if the “timing is right” to sell the company to achieve your target after tax proceeds.Know the market value of your business.

ORGANIZE INFORMATION FOR DUE DILIGENCE

The basic information that you will be asked for is as follows (advisors can help you establish a more comprehensive list specific to your company and industry):

The names and addresses of the shareholders and the shares certificates.

Certificate of incorporation and any certificates of change of name.

Statutory books and company seal.

Memorandum and Articles of association of the company.

Copy of Annual Returns of the company for the last three years, and any changes since then.

Copies of any deeds for premises (freehold or leasehold).

Details of banking arrangements.

Copies of all insurance policies and proof of premiums paid.

Copies of all plant and equipment registers.

Copies of any hire purchase, leasing or other arrangements.

Copies of all maintenance agreements for equipment including computers.

Copies of all software licenses relating to computer equipment.

Copies of any intellectual property rights (patents, registered designs, copyright).

Copies of all employees' contracts of employment and details of current salaries.

Copies of all pension policies relating to employees and details of employer/employee contributions.

Copies of all licenses in respect of environmental law, particularly with regard to the discharge or disposal of waste of all sorts.

Details of the top 10% of your customers.

Details of key suppliers and distributors.

Details of any litigation, current or pending.

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Seller Checklist for Planning a TransactionS AMP L E

PREPARE BUSINESS FOR SMOOTH INTEGRATION

Develop a vision for the company.

Develop and continually update a growth plan for the business, including detailed financial forecasts and actionable 6 month, 18 month, and 3 year strategies.

Develop succession and contingency plans for key management and owners of the company.

Delegate more roles and responsibilities to key management.

Send key employees to management and technical training programs.

Evaluate your company’s strengths, weaknesses, opportunities & threats (“SWOT”).

Evaluate potential buyers’ strengths, weaknesses, opportunities & threats (“SWOT”) to see where your company can complement, fill gaps, etc.

Plan to stay involved with the company after the sale for an appropriate transition period.

Create a plan for quickly integrating your company into another organization within a 6 month period, and be prepared to manage that effort for the buyer.

Objectively evaluate the culture of your people, and contrast it with the culture of other firms.

Create or update an employee manual and organizational chart.

Prepare family members at the company for becoming part of a larger, different organization, or prepare them for moving on after a transaction.

Perfect ownership in intellectual property with trademarks, patents, copyrights, etc.

MAXIMIZE THE VALUE OF THE BUSINESS FOR A BUYER

INTERNAL (these were taken from a list of more than 100 internal value building strategies. Consult your Forbes advisors for additional ways to maximize the value of your firm):

Prepare the business for a smooth integration (see list above).Focus sales and marketing on growing most profitable business lines, existing customers, and/or new customers.Design an incentive plan for key employees where company value is impacted.Create value by implementing those changes that produce the greatest increase to cash flow with the least amount of implementation risk.Stop any accounting practices that are principally designed to lower your taxes but would seem question-able to a buyer.Take advantage of purchase discounts; don’t pay invoices ahead of the required date due.Integrate general ledger, cost accounting and production software systems, and share key financial performance data with managers, advisors and directors.Print out aged receivable listing weekly, and follow-up with past due accounts.Bring in outside directors who have special talents or industry insight.Sell off or sublet non-productive assets such as idle equipment and obsolete inventory, and invest in productive assets.Meet with tax advisor to explore the merits of changing the form of the business from a “C” Corporation to an “S” Corporation.

EXTERNAL: Consider acquiring or merging with another business to maximize value drivers, or overcome gaps and weaknesses.