Selling a privately held business gets more complicated after the LOI. Learn how an integrated legal and financial deal team can help manage due diligence, working capital, negotiations and closing.
Selling Your Business? Why You Need an Integrated Deal Team After the LOI
For many business owners, signing a Letter of Intent feels like the hard part is over.
In our experience, it’s often when the hard part begins.
Once an LOI is signed, a seller can quickly face an extensive due diligence process, financial questions, working capital negotiations, buyer requests, disclosure schedules, purchase agreement negotiations and a steady stream of issues that must be resolved before closing.
For owners of privately held businesses, there’s another challenge: who is actually going to manage all of it?
Large companies may have CFOs, controllers, in-house counsel and transaction teams dedicated to a sale. Most founder- and family-owned businesses don’t. The owner is still responsible for running the company while simultaneously trying to complete one of the most significant financial transactions of his or her life.
That’s why we believe many privately held business owners benefit from an Integrated Deal Team.
What Happens After the LOI?
A typical seller may already have several excellent advisors. There may be a business broker or M&A advisor who found the buyer. The company’s CPA understands the financials and tax history. A wealth advisor may be helping the owner plan for life after the transaction. And M&A counsel is responsible for protecting the seller through the legal process.
But there can still be a significant gap.
Someone needs to coordinate the hundreds of details between the LOI and closing.
The buyer may send lengthy diligence requests. Financial information needs to be collected and explained. The data room must be organized and maintained. Questions need to be routed to the appropriate person. Working capital becomes a negotiation. The purchase agreement and disclosure schedules need to accurately reflect what is happening in the business.
Too often, much of that responsibility ends up back on the owner’s desk.
The Problem With the Traditional Approach
A business sale doesn’t divide itself neatly into “legal,” “financial” and “business” issues.
They overlap.
A buyer’s diligence question can ultimately affect a representation in the purchase agreement. A financial issue can affect the working capital calculation and therefore the amount of money the seller receives. Something uncovered during diligence may need to appear on a disclosure schedule.
These issues shouldn’t be handled in isolation.
An integrated approach allows the legal and financial sides of the transaction to communicate throughout the process while keeping the owner informed and involved in the decisions that matter.
What Does an Integrated Deal Team Do?
At The Kaiser Law Firm, our role as M&A counsel goes beyond simply drafting documents. We help lead the seller through the transaction from the LOI through closing.
Depending on the transaction, an Integrated Deal Team can assist with:
Deal Strategy and LOI
Reviewing transaction structure, important deal terms and potential issues before they become expensive problems.
Due Diligence and Data Room Management
Helping organize the diligence process, manage buyer requests, maintain the data room and coordinate responses.
Financial Diligence and Working Capital
Helping the seller respond to financial questions and understand issues involving normalized working capital and purchase-price mechanics.
Purchase Agreement Negotiation
Negotiating representations and warranties, indemnification, restrictive covenants, purchase-price provisions and other significant terms.
Disclosure Schedules
Working with the seller and financial deal team to develop accurate disclosure schedules that properly reflect the business.
Closing and Transition
Coordinating the legal, financial and transaction workstreams necessary to get the deal across the finish line.
We Don’t Replace Your Existing Advisors
An Integrated Deal Team shouldn’t mean replacing good advisors.
Quite the opposite.
We regularly work alongside a seller’s CPA, financial advisor, insurance professionals, business broker or M&A advisor and other professionals.
The goal is to make those relationships more effective by creating a coordinated transaction team with clear responsibilities.
If you already have strong advisors, we want them involved.
If there are gaps in the team, we can help identify and fill them.
You Still Have a Business to Run
This may be the most overlooked part of selling a privately held company.
While the buyer is conducting diligence, the seller still needs to operate the business.
Customers still need attention. Employees still need leadership. Revenue still matters. And maintaining the company’s performance may be particularly important while a transaction is pending.
The owner shouldn’t become the project’s full-time data-room manager.
A well-constructed deal team allows the owner to remain focused on the business while still making the critical decisions only the owner can make.
Preparing to Sell Your Business?
If you’re considering selling your company—or you’ve already received an LOI—the earlier the right team gets involved, the better positioned you may be to identify issues, manage the process and protect the value you’ve spent years building.
The Kaiser Law Firm represents owners of privately held businesses in mergers and acquisitions and business-sale transactions. Our Integrated Deal Team approach brings legal counsel together with financial and transaction support to help sellers navigate the process from LOI through closing.