by Scott Bushkie. CBI, M&AMI

You’ve listed your business for sale, received several strong offers, chosen your preferred buyers, done some negotiating, and accepted a letter of intent.  Whew!

If you’re like some sellers, you might be thinking all the hard work is over.  Sure there’ll be some paperwork but that’s no big deal. Right? Wrong.

Your buyer and his or her advisors will create an extensive list of documents they need in order to confirm that everything you or your advisors told them is 100% accurate.

You’ll be spending time digging up documents—everything from tax returns to employee manuals, benefit plans, contracts, and vendor agreements.  Ideally your M&A advisor gave you a list of this information at the outset and you’ve spent your time preparing this information.

The more organized you are, the faster and easier the process.  But this due diligence is only part of the closing process.  There are many players involved, and everyone has a lot to do in just what is often just a 30- or 90-day window.

At this point, your M&A advisor transitions from a business marketer to a project manager.  He or she is now herding cats, trying to get several parties to do what needs to be done in a limited time frame. Here are the professionals  who will likely be involved:

Attorneys.  Your attorneys will be trading documents back and forth, trying to reach consensus while protecting your best interests.  Key negotiation points may include deal structure, transition time frame, indemnifications, closing date, and seller representations and warranties.

Either party can initiate a first draft of the purchase agreement.  Meanwhile, the other party can be working on employment agreements or the multitude of other schedules attached to the deal. (For one current deal, we’re at 16-inches of schedule paperwork.)

Accountants.  On the sell side, your accountant will be preparing financial statements or reviewing them for accuracy on a monthly basis.  Meanwhile, the buyer’s accountants will be reviewing the information you supply, also with an eagle-eye for accuracy.

The buy-side accountants will do most of their work off-site, but they’ll come on-site for a few days to do a spot check and ensure credibility. This process is easier if you have audited financials, but your year-to-date numbers will still be up for scrutiny.

Tax Consultants.  The M&A tax consultant will assess tax consequences and advise clients on different tax-efficient deal structures.  This usually happens on both the buy- and the sell-side and then goes to the attorneys for negotiation, as what’s good for one party is usually not ideal for the other.

Lender.  The lender needs a full understanding of the company’s services, market, and growth potential.  They’ll need historical financials and usually some kind of projections from the buyer. Start this process as soon as possible and make sure you give the lender all the paperwork they need to do their job.

Buyers should be wary of verbal promises unless they have a long-term relationship with the lender.  The buyer’s best bet is to have letters of commitment from at least two lenders.

Environmental Consultant.  In today’s world, there aren’t too many deals that don’t require an environmental consultant anymore. For anything in manufacturing, the buyer’s lender will want a Phase 1 site assessment and maybe a Phase 2.

Look for a consultant who has already worked on M&A deals and get written commitment for when they’ll accomplish their work.

Real Estate Appraisal and Title Insurance Company.  This is required, of course, if real estate is involved.  As with other consultants order as soon as reasonable possible and get a written commitment as to when it will be completed.  If possible build in a 7-10 day cushion prior to close as in most cases you will need it.

What we found works best is to sit down and lay out what all parties have to get done and then work from a timeline that everyone thinks is achievable.  This should include specific benchmarks for drafts and reviews.  Your M&A advisor’s role is to expedite information and hold people accountable.

After the attorneys have gone through two rounds of revisions, there may still be open items for discussion. At this point we recommend gathering the buyer and seller in the same room to negotiate those issues directly.  Deals fall through when attorneys get overly assertive in pushing their client’s interests, to the detriment of the final goal.

I’ve also found that if either side believes the deal is just about dead, you can’t try to email your way out of the situation. I’ve seen a buyer save a deal by flying 2000 miles and spending $1500 on a last-minute plane ticket just to discuss one sticking-point with a face-to-face conversation.

Closing is a big job.  And the longer the process takes, the less likely the deal will get done.  My advice to all sellers: be organized, be honest, work with M&A specialists, and do your part to keep the process moving forward.

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A thought-leader in the industry, Scott developed the Cornerstone Process to offer investment banking M&A-level services to the lower middle market. The result is a closing ratio that’s more than double the national average.