Merger and acquisition (M&A) transactions require a lot of complicated legal, tax and business knowledge. Often, a sale falls through despite good fundamentals because the seller did not adequately prepare.
If you are a business owner and contemplating the sale of your company, see below for some common errors would-be sellers make. According to the Institute for Mergers, Acquisitions and Alliances, over 325,000 M&A transactions occurred with a value well over 34,000 billion USD since 1985. M&A is big business, so do not miss out on your chance to cash out on your hard work.
Delegate your responsibilities
As a business owner, you face the temptation of trying to run everything yourself. However, a potential buyer might see this as a negative. In a business transaction, you stand to make a large amount of money. If you are vital to the operation of your company and immediately leave after a buyout, the buyer stands to gain very little. Intelligent business owners ensure they have a competent management team to handle the day-to-day operations.
Figure out your tax liabilities
You need to know the status of your state and local tax payments. This seems obvious, but local and state taxes regularly change. If you cannot give the buyer a realistic forecast of potential tax liabilities, they often predict the worst-case scenario. Unknown liabilities are a huge pitfall in business transactions.
You might think selling your business is easy. After all, you already put in the work to build a profitable enterprise. But, if you do not get your management in order and create a detailed list of your liabilities, a buyer will hesitate to sign on the dotted line.