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M&A Weekly Digest – August 19th, 2011

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The Private Business Owner is starting a new feature that provides M&A news and tips each week. Jumping right into this week’s highlights, there is good news for all of North America, as the U.S. re-shoring initiative has gained more traction and Canadian M&A activity was up the second quarter of this year. M&A activity continues to recover nicely and the last week of July had 11 IPOs, making it one of the busiest weeks in 2011.

For those interested in learning more about the process of selling a business, you can learn about the valuation, the next step after creating a sustainable business and deciding to sell it. [Read more…]

Delaying Your Company’s Sale Could More Than Double the Taxes You Owe

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In December of last year, Congress passed the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010. Essentially this act extended the Bush era tax cuts through the end of 2012.

A significant number of taxes and rates were affected by this extension, the most important being the extension of the capital gains rate at 15 percent. This means that you have until December 31, 2012, to sell your business and pay all or at least part of it in cap gains tax at 15 percent. [Read more…]

5 Fundamental Tips for Preparing Your Exit Strategy

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You’ve heard it said: “The only sure things in life are death and taxes.”

A truthful addendum to this for the private business owner that is equally sure is that at some point you will be exiting your business.

No matter how much you love your business, there will come a time where the game will change.

Some will exit based on retirement or medical issues. Some will notice changes in the market or industry that will begin to take their toll.  Some will pass the business along to a family member or a loved one. No matter the specific circumstance that will motivate the exit, the business owner must be ready when the time comes.

In the same manner that you keep your receipts when preparing to file for taxes, you must also prepare in advance for exiting your business.

In order to help you prepare, we’ve listed five fundamental steps to preparing your exit strategy:

(1) Define Post-Business Objective

The first step of exit planning is a definition of your objective. What are your plans once your business has sold? This objective will drive the exit planning process.

The owner will need to decide how much profit he or she needs to make out of the sale of the business in order to achieve an ideal outcome.

(2) Financial Planning

Once you have determined your primary objective, you are ready to begin to plan the financials for the future sale.  During this portion, the owner and professional advisors will begin to look at the cash flow and profitability of the business.

The current value of the business will be assessed including all assets.  Once the financials of the business have been assessed, there will be a thorough review conducted of the business, and of its value drivers.  The question of what portion of the business “leverage value and reduce risk” are addressed.

As this is assessed you will be able to make a better effort to make the most of your time as you are preparing to meet your exit planning objectives.

(3) Management Transition

Whether or not you are planning to sell to a third party or to an insider will determine how you manage the transition in your exit planning process.

Is it transferred to a third party or to an insider?  This will determine how to plan for their exit. Often times if an owner is planning to sell to an insider who may not come to the sale with substantial personal capital, the owner will need to plan for this in order to still receive maximum value during the transition.

(4) Contingency Plan

With every good exit plan, there needs to be a well thought out contingency plan.  Risks must be assessed.  Some risks include: potential litigation, large portions of revenue in the hands of a few clients, liabilities, employee risks and others.

(5) Personal Estate Planning

The final stage of an exit planning process is your personal estate planning. This is certainly not the most exciting portion of the process, but critical to a successful plan is planning where your money and assets will go if something were to happen and you were to pass away earlier than expected. SmartMoney offers helpful solutions personal estate planning.

An exit plan is critical and hiring a professional as an advisor during the process will increase the accuracy of your plan.

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