Exit Solutions for Closely Held Businesses

Business Intermediary Services

The Real World Of Business Transfer

In the past ten years, with the advances in the internet and other communications technology, the world of small business transfers has changed dramatically.  A new breed of small businesses has arisen that actually operate globally in every conceivable niche.  Often they have minimum facilities, yet many do significant gross sales, and are quite profitable.  Many are high-tech.

The business transfer industry has largely failed to effectively adapt to the new conditions.  Buyers can come from anywhere in the world.  Many are motivated by the opportunity to obtain a “green card” if they purchase a business meeting certain conditions.  In technology there are small businesses in India, Indonesia, China and other “third world” countries which form key links in the supply chain of virtually every product.   The spectrum of small businesses has been growing exponentially, and there are profitable businesses in a variety of niches that would not have been thought of only a few years ago.

The Triaz Approach To Business Transfers

Because buyers and sellers can be geographically a world apart it is more necessary than ever before to have a business properly “documented” if it is to be sold. 

  1. The first step is a Qualitative Analysis to determine the marketability of the business, strengths and weaknesses, and identify problem areas which should be corrected or addressed before the business is offered for sale.
  2. The second step is to obtain a Valuation.   The appraisal should be compliant with USPAP (Uniform Standards for Professional Appraisal Practice).  There are USPAP standards for business, equipment, and real property valuations.  Triaz will coordinate with an appropriate certified appraiser to prepare the valuation.  The appraisal is the foundation for the business sale.  It not only determines a defensible opinion of value, it contains financial and descriptive information that is essential to communicate to a prospective buyer. 
  3. The third step is to prepare a Marketing Plan.  This will identify potential purchasers, set limits for the degree of public disclosure, and identify companies or entities to whom the business should not be exposed.
  4. The fourth step is preparation of a Confidential Offering Memorandum (or a “Private Placement Memorandum”) as appropriate.  This tool is used to present the business to a prospective buyer.  It is intended to minimize discussion, and to lead a prospective buyer to make an Offer – subject to a successful Due Diligence investigation.  Once accepted (counter offers may be made) nothing happens until the Due Diligence is completed.  If satisfactory, escrow is opened.  If not, the buyer may elect to withdraw his offer (and his deposit) or to modify his offer.
  5. The fifth step is a Due Diligence Checklist, a list of items that a potential buyers will want to inspect as part of a due diligence inspection.  With this checklist, the business owner has time to gather and compile all of the information that will be needed during the due diligence phase.  This level of preparation also demonstrates to prospective buyers the seriousness of the business owner and thus time will not be wasted by either side.
  6. The sixth step is to understand your options for structuring a deal with the Triaz Tax Structuring and Analysis Report.  This report will give you an analysis of your structuring options and the associated tax implications for the net proceeds so you can proactively establish a win-win scenario with the buyer prior to receiving the offer.  We will present you with “What-If Scenarios” based on different pricing and structuring strategies.  This report can save you extensive time with potential buyers and helps to make sure deals stay on track through the closing.