Transaction Q+A: What Private Business Owners Should Know Before Selling

Brian Andreosky, President of Aldrich Capital Advisors, and lawyer Matt Bisturis, Shareholder at Schwabe, Williamson & Wyatt, P.C., discuss steps that private company owners should consider before, during, and after sale of their business to support a successful transition.

Brian Andreosky (BA): Business owners are always thinking about tomorrow—whether that’s around how they’ll continue to improve their operations in the short-term or what their succession plan might be down the line. As a lawyer and member of Schwabe’s Privately Held Businesses & Enterprises group, what are some steps business owners should take when starting to plan for an eventual sale of their company?

Matt Bisturis (MB): I think about that question in two parts. First, what are the things the owner wants to achieve when it comes to their personal financial and estate goals, and second, how can they optimize the condition of the business for a sale?

On the personal side, you want to be sure there’s alignment among the owners, as well as anyone who might have a vested interest, whether that’s spouses or family members. I’ve seen transactions that went pretty far down the line, only for a minority owner or spouse to express concerns about the sale, which can slow or even potentially stop a transaction.

Also on the personal aspect, it’s critical that a seller’s estate planning and financial planning are coordinated with the sale. A seller should have a clear sense of what sale proceeds are needed to satisfy their financial objectives. The sales price, the timing, the terms of the sale, and the estate planning strategies—including gifting and charitable objectives—all should be considered. These strategies can require advance planning and are best done well ahead of the sale.

When it comes to the business itself, it’s important for owners to optimize the structure to maximize both the value and salability of the company. Entity type, structure, and other factors can make a company more valuable to a potential buyer.

For example, a company with non-operating assets or disparate lines of business might benefit from advance planning to make it easier to sell certain business divisions or spin off non-operating assets.

BA: How soon should a business owner begin working with their business lawyer to review items related to legal due diligence so their company is well positioned for sale?

MB: I often tell clients that today’s the day to start, well before you even start looking for a buyer. Doing a sweep of the standard pre-transaction due diligence items well before a sale can be helpful. It can be very overwhelming to get pages and pages of questions from a buyer, especially if you haven’t prepared for that in advance. If there are gaps in the company’s records or if the buyer has concerns around risk, trying to address those in the middle of a transaction can be a real challenge.

From a seller’s perspective, it’s very important to proactively identify those gap areas and try and close them, to reduce what a buyer may view as a risk or area of concern or uncertainty. Starting well in advance of the due diligence process also gives you time to make operational changes to your business that could make it more valuable.

For example, if the company needs to protect key intellectual property that requires patent applications or trademark applications, or if it needs to move towards audited financials, these could be multi-year efforts.

If the seller can understand and get ahead of their risk areas, they’ll be well prepared to respond to questions, and the business could be more valuable to the buyer.

BA: For a business owner, we’ve seen that having the right team can really help maximize the return on a sale. Often a transaction team includes an M&A advisor, a wealth advisor, a CPA, and a lawyer. Can you tell me about the specific role you play during a sales process?

MB: Each sale is a bit different, of course. Sometimes we’re brought on early in the process and play more of a planning role, and other times we come much closer to the transaction, after the letter of intent is signed. We obviously can add more value the earlier we are involved, including helping evaluate a range of options for business transition which can include everything from selling internally to employees or management to an external sale or investment.

Once we get to the actual transaction, our role becomes focused on drafting and reviewing transaction documents and negotiating key terms. Oftentimes we start with preparing the letter of intent. If there already is one, our focus starts with transaction documents and helping with the due diligence response.

From there, it’s helping ensure the transaction progresses smoothly, facilitating the closing, then assisting with the seller’s post-transaction items, which could include estate planning, a new investment, or perhaps setting up a family office or a charitable venture.

At the center of everything is understanding the goals of the owner who’s selling and working closely with the other members of the transaction team. Schwabe’s Privately Held Business and Enterprise lawyers have experience in various industries and practice areas, from M&A to estate planning, which allows us to provide a well-rounded approach as clients navigate different angles for their transition plan.

BA: In the upcoming Aldrich 2025 Private Company Outlook Report, we found that more than 50% of business leaders received at least one unsolicited offer in the past 12 months. Whether an owner is actively looking for a buyer or just receives an unsolicited offer, why is it important for an owner to be patient and work through a methodical process before getting into negotiations, especially when it comes to things like a letter of intent and non-disclosure agreement?

MB: When an owner gets a call from an interested party for a potential sale, it can be really exciting, and often the legal paperwork is the last thing on their mind. But it’s critical to take a step back and be sure you have a solid commitment from all parties regarding mutual confidentiality for any information that’s exchanged, and an appropriate letter of intent to frame the transaction. Things don’t always work out, and it’s important to protect yourself well before you start sharing company information or committing to an exclusive process.

Many deal terms in the letter of intent can be non-binding, so it’s important to prepare the document in a way that makes it very clear what’s binding and what isn’t. Even if not binding, once terms are included in a letter of intent, they set expectations and can be very hard to move away from. In some circumstances, a letter of intent can obligate the parties to pursue the transaction in good faith.

BA: Finally, what’s the one piece of advice you’d like to share with business owners who might be looking to sell in 2025?

MB: The biggest thing for 2025 is uncertainty, especially when it comes to potential tax law changes. There’s potential for a very busy year when it comes to transactions and sales for private companies, especially toward the second half of 2025.

I suggest that owners who are considering selling get prepared to act quickly if the right opportunity comes along. That means having a plan in place, positioning the business in the right condition for a sale, and confirming that the owners are aligned and prepared from a due diligence standpoint.

To see further insights on today’s transaction market for private companies, click here.

The opinions expressed herein are solely those of the interviewee.

This article was reposted with permission from Aldrich Capital Advisors LP.

Transaction Q+A: What Private Business Owners Should Know Before Selling

BA: How soon should a business owner begin working with their business lawyer to review items related to legal due diligence so their company is well positioned for sale?

BA: For a business owner, we’ve seen that having the right team can really help maximize the return on a sale. Often a transaction team includes an M&A advisor, a wealth advisor, a CPA, and a lawyer. Can you tell me about the specific role you play during a sales process?

BA: Finally, what’s the one piece of advice you’d like to share with business owners who might be looking to sell in 2025?

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Transaction Q+A: What Private Business Owners Should Know Before Selling

BA: How soon should a business owner begin working with their business lawyer to review items related to legal due diligence so their company is well positioned for sale?

BA: For a business owner, we’ve seen that having the right team can really help maximize the return on a sale. Often a transaction team includes an M&A advisor, a wealth advisor, a CPA, and a lawyer. Can you tell me about the specific role you play during a sales process?

BA: Finally, what’s the one piece of advice you’d like to share with business owners who might be looking to sell in 2025?

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