This is the main driving force behind the success of the industry as a leader in the global economy. However, as organizations expand, it is amidst the turmoil and uncertainty of political factors such as trade agreements and tariffs. It is this that seems to be the primary compulsion for most of the merger and acquisition activity. 

Despite the potential threats posed by the politics of trade, many businesses in this area demonstrate tremendous growth metrics, which pitch them as viable targets for acquisitions or mergers. In that sense, 2019 could be one of the most advantageous ears to sell or purchase a company in the manufacturing industry. 

Manufacturing Market Opportunities 

One of the most advantageous factors for companies in the manufacturing industry is the critical nature of the work done, which has fostered continued economic growth. Over the past few years, the industry has seemed to thrive, recovering from the recession of the early 2000s and is likely to surpass growth expectations for the second year in a row. 

Additionally, many businesses in this sector have spent the past few years identifying opportunities to implement technology that will increase production yields. Manufacturers have multiple points across their entire organizations that lend themselves to technological advancements. 

For product innovation and design, three-dimensional prototyping can be integrated. Cognitive technologies, such as artificial intelligence, can be applied to enhance the customer life cycle by creating exceptional experiences which foster continued growth. Engaging automation tactics during the manufacturing process, like using robotic arms on production lines, can increase outputs while implementing automation in other parts of the business, such as the finance office, can shorten the length of time receivables are outstanding and improve cash flow. Positively impacting these business metrics prime the business for a transaction. 

Finally, coming out of 2018, the merger and acquisition activity not only increased, but the average deal size grew as well compared to what we saw in 2017. This seems to have positioned the industry for an active 2019, driven by an increasing focus of U.S. companies to expand their geographic presence and product portfolios. 

Environmental Services Market Threats

However, the growth of the past year was also tarnished by tariff activity and negotiations between the United States and China, two of the most dominant players in the global manufacturing industry. The uncertainty began when the U.S. introduced tariffs on imported steel and aluminum which kicked off a volley of trade restrictions between the two nations. The situation creates several risks for those operating within the industry and leaves many questions regarding the impact such regulations will have on profit margins as the price of raw materials remains in flux. 

Throughout the turmoil of trade restrictions, we have also seen talent retention among top executives becoming an issue. The job vacancies have been growing at double-digit rates beginning in 2017 and are poised to surpass the record high seen in 2001. 

The manufacturing industry also faces a talent shortage of skilled workers, which could significantly impede the rapid growth and regeneration we have seen over the past few years. Without a workforce that has the right skill set, manufacturers will not be able to keep up with growing demand, will be unable to respond to new market opportunities, and will fail to pursue innovations that would continue to propel the industry’s growth. 

How The Hatteras Group Can Help

The Hatteras Group is a collaborative team of professional intermediaries and advisors that guides business owners and entrepreneurs as they navigate the complex process of mergers or acquisitions in the manufacturing industry. Generally, we work with those companies whose annual revenues are $5MM to $100MM. 

If you are trying to value your business in an effort to sell it, we can help you audit the health of your company with an advanced 10-point evaluation checklist to determine if there are any issues that could potentially derail a sale in the future. Contact us today for more information!

The post Manufacturing Industry: 2019 M&A Outlook appeared first on Hatteras Group.

Two of the most common methods of buying or selling a company are mergers and acquisitions. Both of these strategies are methods by which to combine two companies into one with the goal of increasing the capabilities of both moving forward. It is no wonder that they are often confused and lumped together as being the same, but in reality, there are several important distinctions between them. If you are assessing a merger or acquisition as part of your sale, it is crucial that you know about these differences. 

What is a Merger?

A merger is when two companies join together to form a new entity. This process is typically part of a broader strategy between the two organizations to consolidate resources and produce a new management structure that will help both grow together. Usually, a new name will be given to the merged company, whether a hybrid of the two former names or an entirely new one is the choice of those involved. 

In an ideal situation, both companies would consider each other to be equal and the power difference between them is inconsequential, which is why a merger is generally understood to be a friendly and planned process. However, that is rarely the case as many leaders find it challenging to agree on all strategic items about how the unified organization should move forward. Such disagreements can lead to a lot of tense conversations throughout the integration process. 

What Is An Acquisition? 

In contrast, when an acquisition takes place, a new company does not emerge. Instead, the smaller of the two companies is absorbed into the more substantial one and ceases to exist moving forward. This strategy requires the acquired company to take on the name of their buyer and give up all decision-making power unless other terms are stipulated in the acquisition agreement. In some cases, a larger company may acquire a piece or division of the smaller organization. 

As a result, an acquisition is often viewed negatively as the buyer will take over all operational management decisions and have absolute power of the acquired organization after the deal is finalized. Due to these negative connotations, many companies will refer to an acquisition as a merger even when it is definitely not. This misrepresentation has resulted in the two terms becoming increasingly convoluted and misused as synonyms. In truth, acquisitions are far more common than mergers. 

What to Expect During a Merger or Acquisition

Regardless of the scenario you pursue, merger or acquisition, the leadership of both organizations involved in the process should expect to undergo a significant level of scrutiny across all areas of the business. To better prepare for this and speed up the due diligence process, it is best to organize all your documentation ahead of time. 

For more specifics, check out The #1 Checklist to Selling a Business. This guide will walk you through all of the various items you will need to consider as part of the selling or purchasing process including corporate structure, tax documentation, intellectual property, material assets, and customer contracts. 

Additionally, it is best to determine the value of your company before entering into a sale. Though there are a number of methods at your disposal that will vary in accuracy, this exercise will help you evaluate whether a particular proposal would constitute a merger or an acquisition. Knowing the estimated valuation of your business will also protect you from being taken advantage of during the process of a sale or purchase. 

Get Help From The Hatteras Group

The Hatteras Group is a collaborative team of professional intermediaries and advisors that guides business owners and entrepreneurs as they navigate the complex process of mergers or acquisitions in a variety of industries. Generally, we work with those companies whose annual revenues are $5MM to $100MM. 

If you are trying to value your business in an effort to sell it, we can help you audit the health of your company with an advanced 10-point evaluation checklist to determine if there are any issues that could potentially derail a sale in the future. Contact us today for more information! 

The post What’s the Difference Between a Merger and Acquisition? appeared first on Hatteras Group.

This shift in focus is driving an increasing presence of environmental service subsectors. However, as the industry expands, it is simultaneously consolidating. Larger businesses are investing in the acquisition of niche companies who offer services that can help to round out their existing offerings.

Businesses in this sector tend to exhibit some key criteria that investors find attractive including high barriers to entry, demonstrated track records of organic and acquisitive growth, and a limited number of established regional and national organizations. For these reasons, 2019 could be the most advantageous year yet to sell or acquire a company in the environmental services industry.

Environmental Services Market Advantages

Perhaps the most beneficial element of the environmental services industry is the essential nature of the services provided. From waste disposal services to compliance and regulation training, this relatively small industry will continue to grow as technologies develop and new products come to market both for consumers as well as manufacturers.

Combined with the limited number of players in the game, this could help explain why there has been an explosive uptick in capital markets and private equity investment across a number of environmental services subsectors. As a result, the industry is prime for another wave of consolidation in the coming months and years as regional organizations look to combine in an effort to scale their services to a national level. In fact, this level of consolidation has already begun in certain subsections of the industry including industrial cleaning services and the wastewater space.

Environmental Services Market Challenges

However, the nature of these industries can be fairly technical and unique which leaves many employers with the challenge of not only finding employees capable of performing those tasks but also keeping them. As a result, many firms will need to become more creative in their talent acquisition tactics and proactive in keeping their existing employees happy as they vie for the attention of a limited pool of potential candidates.

One particularly effective way to find potential employees is to partner with local universities and trade schools with programs relevant to the services you offer. Developing and fostering relationships with program administrators can help you connect with talented students that might not be on your competitor’s radar yet.

Similarly, you may consider creating your own employee training initiatives and programs to help provide on-the-job training for new graduates to learn the business as well as for existing employees to further their skill set. While this typically requires a significant upfront investment on your part, your employees will recognize that you care about their future.

In addition to talent considerations, many environmental service firms may be too niche to thrive on their own. While this is great news for a larger company looking to acquire a smaller one, it is a challenge for that second organization. A lack of diversity in the services offered could impact the valuation of your company as standard business metrics may not indicate the true worth of your company. Investing in some new revenue streams prior to selling could help you achieve positive outcomes that would directly increase your negotiating power when the time is right.

How The Hatteras Group Can Help

The Hatteras Group is a collaborative team of professional intermediaries and advisors that guides business owners and entrepreneurs as they navigate the complex process of mergers or acquisitions in the environmental services industry. Generally, we work with those companies whose annual revenues are $5MM to $100MM.

If you are trying to value your business in an effort to sell it, we can help you audit the health of your company with an advanced 10-point evaluation checklist to determine if there are any issues that could potentially derail a sale in the future. Contact us today for more information!

The post Environmental Services 2019 M&A Industry Outlook appeared first on Hatteras Group.

In some cases, you may consider selling your business because someone approached you directly with an interest in purchasing your company. Other times, you might just be contemplating whether or not it is the right move for you personally as a leader and owner. At The Hatteras Group, we have worked with business owners in a variety of situations to determine the best time for them to sell. Here are some of the most important lessons we have learned from this experience that could mean that NOW is the right time to sell your business.

Business is Booming  

You may assume that when your company is doing well, it is the time to keep going, pushing yourself to the limit. In reality, this can be one of the best times to sell your business. It is during these times that your company appears to be most valuable to potential buyers. They can see the demand that consumers have for your product or service and envision how they could profit from owning your business. Navigating these offers can be particularly challenging as you have to balance your confidence in your company with its actual valuation at the time of negotiation.

A Market Turn  

If you sense that the market may be turning towards a new trend that would threaten to make your business irrelevant, it may be time to think about an exit strategy. While you always have the option to try and pivot your company to accommodate this change in demand, it could end up being a costly failure that leaves you in worse shape than before.

Recognizing that your business model may not be able to withstand a new trend in the market can be tough to stomach, but dealing with it before it drastically impacts your business can help ensure you receive the best offer possible. There are always other entrepreneurs looking to disrupt industries, so even if you’re lucky enough to see the change coming, you may have a very short window to take action.

Your Company Outgrew You  

It is hard for all of us to admit, but sometimes we outgrow things or they outgrow us. Running a business is no different. If you constantly feel like your head is underwater and you don’t know how best to help your company or employees succeed, it might be best to step aside and let someone with more experience run things. Alternatively, if you feel like you have done what you can for your existing company and would like to pursue a new challenge or opportunity, there is no shame in finding a buyer to take over.

There is An Opportunity

There is never a better time to consider selling your company than when someone is standing at your door with an offer in hand. If the market is in your favor or you are a disruptor that seems to be hitting a need in the industry, it will attract the attention of larger organizations. These companies will likely be able to make you an offer that is well above the actual value of your company, but they see the potential and want to eliminate the chance that you become a future competitor. Lucrative offers like this should be thoroughly considered.

The Hatteras Group Can Help

The Hatteras Group is a collaborative team of professional intermediaries and advisors that guide business owners and entrepreneurs as they navigate the complex process of mergers or acquisitions across a variety of industries. Generally, we work with those companies whose annual revenues are $5MM to $100MM.

If you are trying to sell your business, we can help you determine the value and audit the health of your company with an advanced 10-point evaluation checklist to evaluate if there are any issues that could potentially derail a sale. Our team can also provide advice on how to address any concerns that we find. Contact us today for more information.

The post When Is The Right Time To Sell Your Business? appeared first on Hatteras Group.

Step 1: Prepare to Exit  

Waiting for an unexpected factor to force your hand into selling will put you at an extreme disadvantage when it comes to pricing. Illness, lack of a succession plan, or the arrival of a competitive threat could all impact your ability to sell at the price you deserve. So plan your exit strategy way before you think you need to. Having all of the following items addressed will help you be prepared for anything.

Step 2: Determine the Value  

There are a variety of methods you can use to calculate the current value of your business. Each has its own advantages and challenges, with more accurate models becoming increasingly more complex to calculate on your own. This is why using a qualified valuation professional may be your best option if you are seriously considering selling your company. Such individuals will be able to provide you with the most accurate baseline possible.

Step 3: Clean Up Financials  

Keeping up with the hygiene of your financial records with so many other demands on your time can seem next to impossible. But as you approach a potential sale, cleaning up your financials can help to drastically improve the outcome as any possible buyer will want full transparency during their due diligence process. As an owner, you can avoid many red flags by working with an accountant to clean up your financial statements and business tax returns for at least the past three years.

Step 4: Boost Your Sales  

Buyers are most interested in successful businesses, not struggling ones. So if your sales are declining, it is not the time to sell your company. And if a single customer accounts for 20% or more of your revenue, you will want to diversify your customer base prior to a sale as that kind of dependence will make a buyer nervous. Try to boost your sales with increased marketing and promotions so you can present buyers with a better, more valuable reason to make the purchase.

Step 5: Find a Broker  

Selling a business is complex so enlisting the help of a broker can help you get the best offer. Depending on the size of your business, a broker will typically charge a commission of 10% or more. But for this, they will handle the valuation of your company, prepare a prospectus on your business, tap into a large network to locate buyers and list with suitable marketplaces, and may even help guide buyers to financing resources.

Step 6: Prequalify All Buyers  

One of the most common reasons the sale of a company falls through is because buyers are unable to secure the appropriate funding for the purchase. Prequalifying your buyers helps to eliminate some of this risk. Due diligence is not just for the buyer, and as a seller, you should complete your own evaluation of the individual or company making the purchase. Some banks will even require the seller to provide a portion of financing for the transaction to help ensure your continued interest in the success of the business.

Step 7: Finalize the Contracts  

As you can imagine, there are a number of legal considerations and documents that are required to finalize the sale of a company. Among the most critical to close the deal is the asset purchase agreement, the contract for the sale, and the purchase agreement for all business assets, including both physical and intellectual property. All this paperwork will need to be reviewed carefully as they usually consist of non-compete agreements, asset listings, and may even stipulate what you, as the prior owner, can do next and when.

Hatteras Group Can Help

The Hatteras Group is a collaborative team of professional intermediaries and advisors that guide business owners and entrepreneurs as they navigate the complex process of mergers or acquisitions across a variety of industries. Generally, we work with those companies whose annual revenues are $5MM to $100MM.

If you are trying to sell your business, we can help you determine the value and audit the health of your company with an advanced 10-point evaluation checklist to evaluate if there are any issues that could potentially derail a sale. Our team can also provide advice on how to address any concerns that we find. Contact us today for more information.

The post 7 Steps to Selling Your Business appeared first on Hatteras Group.

This is expected to drive consolidation of HVAC organizations as they look to increase their ability to scale and grow across both residential and commercial developments. Although there is some expectation of a possible recession in the next one to two years, it does not seem to be slowing any of the merger and acquisition activity we have seen among HVAC companies.

As a result, being aware of the unique advantages and challenges of HVAC businesses in the current financial climate can help you make the best decisions when it comes to your transaction.

HVAC Industry Advantages

One of the most beneficial elements of the HVAC industry is the reliance on and necessity of manual maintenance. With the presence of technology increasing in nearly every industry, many jobs are becoming obsolete as machines are able to perform more work, faster. But in the HVAC industry, automation cannot be used to complete on-site customer repairs. This is part of what gives the industry its stability and protects it from the harshest effects of any potential recession.

Somewhat ironically, the need for manual repairs increases the more advanced HVAC systems become. Due to the complex nature of these new systems, it is unlikely that a customer would be able to repair it themselves, though most don’t attempt this regardless of the technology of the system, or call someone outside of their original vendor. So while advances in automation and technology may be worrisome for other industries, HVAC companies should plan to service their customers and monetize these interactions when possible. Doing so will continue to build the value of your business.

HVAC Industry Challenges

Unfortunately, when your business relies on manual labor, you have to find and hire employees capable of performing the work. Therefore, one of the biggest challenges currently facing the industry as a whole is not only finding well-trained talent to hire, but keeping them with your company once you do. This is why many companies have gotten creative with their recruiting tactics and have been proactive in implementing changes that will increase employee satisfaction.

A quick way to get connected with potential employees is to establish connections with local vocational or trade schools with HVAC training programs. When you develop and foster relationships with program administrators, they will likely take the time to introduce you to some of their most talented students. After all, they want to help students find job placements upon the conclusion of their training.

Alternatively, some companies have begun to develop their own comprehensive employee training programs in an effort to attract hungry, young talent. This means that your trainees will start contributing to your workforce much faster as they receive on-the-job training while they progress their skills. Going this route, however, requires significant upfront investment on your part as time, money, and other resources will need to be devoted to creating and implementing the program.

Finally, keeping strong talent continues to threaten the success of many HVAC companies. Technicians are often required to work long hours filled with strenuous activity, no matter where they are. You can stand out from other employment options by showing them how much you value them as employees. Initiatives such as improved healthcare coverage, increased wages, and enhanced time off policies can go a long way in making your employees feel more like family.

How The Hatteras Group Can Help

The Hatteras Group is a collaborative team of professional intermediaries and advisors that guides business owners and entrepreneurs as they navigate the complex process of mergers or acquisitions in the HVAC industry. Generally, we work with those companies whose annual revenues are $5MM to $100MM.

If you are trying to value your business in an effort to sell it, we can help you audit the health of your company with an advanced 10-point evaluation checklist to determine if there are any issues that could potentially derail a sale in the future. Contact us today for more information!

The post 2019 HVAC Industry M&A Outlook appeared first on Hatteras Group.

Congress is also expected to make spending on infrastructure a priority in 2019. However, it may not be enough to continue to bolstering the trucking and freight industries. So what does this mean for mergers and acquisitions over the coming months? Here’s what we predict and what we’re already seeing for 2019:

Slowing Freight Activity

According to the Cass Freight Index, the first quarter of 2019 saw the first decline of freight volume in the United States since the trucking recession of 2015. This is likely the result of decreased consumer spending over the past few months. With less freight needing shipment, the industry could begin to contract after a period of strong growth.

Decreased Production of Class-8 Trucks

In 2018, we also saw a historic surge of Class-8 trucks being purchased by shippers and therefore, their production increased as well. But in February of this year, purchase rates plunged by 58% compared to a year prior. Closely tied to slowing freight activity, the decrease in production of these trucks will continue if freight shipments do not begin to increase over the next few months.

Shortage of Drivers

Though unemployment rates throughout the broader economy are lower than previous years, the long haul trucking sector has experienced consistently high turnover for decades, and that is not expected to change as a result of generally poor recruitment strategies and low wages. Owners and managers could combat these effects, keeping their workforce engaged, by increasing wages and implementing better recruitment practices to attract new drivers that may have a longer tenure in these positions.

Given these indicators, we can assume that the boom of merger activity that occurred in 2018 will most likely begin to slow throughout the rest of this year. Although we expect some mergers or acquisitions to occur and continue to decrease the competition, they will almost certainly occur less frequently. This is due to the fact that mergers and acquisitions rely on having strong, healthy companies in a place to purchase other smaller or weaker business. If the entire industry is negatively impacted by slowing freight activity, decreased Class-8 production, and driver shortages few companies will be in a position of strength to become buyers.

In fact, we have not seen any notable activity within the trucking industry announced yet in 2019. But this may actually be a factor of the sheer number of mergers and acquisitions that took place in 2018. It could be that after these transactions took place, those stronger companies need time to integrate their new purchases before making another. Our team predicts that if more mergers or acquisitions are going to occur in 2019, they will likely be finalized or announced in the latter part of the year.

If selling your company or purchasing another is part of your 2019 strategy, however, there are a number of considerations you should evaluate prior to making any resolute decisions. For a sale in particular, you will need to determine the valuation of your company in order to evaluate any offers that are made to you. Fortunately, The Hatteras Group can help you with all of these matters.

About The Hatteras Group

The Hatteras Group is a collaborative team of professional intermediaries and advisors that guide business owners and entrepreneurs as they navigate the complex process of mergers or acquisitions in the transportation and logistics industry.

Generally, we work with those companies whose annual revenues are $5MM to $100MM. If you are trying to value your business in an effort to sell it, we can help you audit the health of your company with an advanced 10-point evaluation checklist to determine if there are any issues that could potentially derail a sale in the future. Contact us today for more information.

The post 2019 Trucking & Transportation M&A Outlook appeared first on Hatteras Group.

Of the various methods available, there is no singular “right” way, but there are definitely an infinite number of wrong ways to determine the value of your business – and the value will largely be a factor of the industry in which you operate.

And while an accountant or another valuation professional can walk you through your options in detail, you can also utilize one of the methods detailed below in order to calculate a valuation for your company.

Book Value

Using the asset-based approach, you will simply add up the value of all your assets including buildings, investory, equipment, cash on hand, customer lists, etc. and then subtract any liabilities or debts. You would use this information to then update your company’s balance sheet accordingly and would be left with a singular value.

However, this method does not take into account other elements that could make the company more valuable, such as expected revenue and earnings. As a result, this is rarely the best approach for determining the value of a business – though it is one of the simplest and could therefore provide a rough estimate to use as a baseline. After all, if you don’t have a good set of books, your company probably isn’t worth much.

Revenue-Based

Using this method involves calculating how much your business generates in revenue annually through sales. Once you have this number, you could approach a stockbroker or a business broker who would be able to share more information regarding how much a typical business in your industry might be worth at that level of annual revenue. Again, this is not the most accurate method of determining your company’s value but would give you a relevant reference point.

Earnings Multiples

A more accurate representation of your company’s value would be to use a multiple of the business’ earnings, also known as a price-to-earnings (P/E) ratio. With this method, you would calculate the estimated earnings of your company over the next few years and multiply it by the P/E ratio.

The ratio could be specific to your company or you could utilize an industry standard relevant to your business. For example, the industry average P/E ratio for HVAC companies is around 40. So if an HVAC company has projected earnings of $200,000 per year, the business would be worth $8 million.

Discounted Cash-Flow Analysis

A discounted cash-flow (DCF) analysis is most likely the best and most accurate method of valuation. This complex formula projects your company’s annual cash flow into the future and then discounts the value of that future cash flow to today using what is known as a “net present value” calculation. Essentially, the idea is based on the concept that a dollar today is worth more than a dollar tomorrow.

When it comes to determining the value of your company, it is tempting to simply look at the numbers. While that is a critical element in your calculation, you should look beyond financial formulas and consider more complex models. For instance, the geographical location and competitive landscape could impact your value. If your company is the only local transportation provider for groceries along a remote piece of coastline, your business could be a valuable purchase for a larger supplier that needs access to that area. So consider your strategic value to would-be buyers when determining your company’s value.

What’s Next?

If you are trying to value your business in an effort to sell it, you will want to speak to a professional who can help you determine the most accurate number. This is a service we offer at The Hatteras Group as we have been in the business of mergers and acquisitions for decades, and in our experience, we have overseen millions of dollars exchanged.

We have an experienced team comprised of former business owners who have sold their own companies and now help others do the same – all while getting the best deal possible. Not only can we help you determine the value of your business, but our team can audit the health of your company with an advanced 10-point evaluation to determine if there are any issues that could potentially derail a sale in the future. Contact us today for more information.

The post How to Determine the Value of Your Business appeared first on Hatteras Group.

But before we dive into all the items that must be addressed during the sales process, it is important that you consider all that you might have to give up when you sell your company. Depending on the type of arrangement you make with your buyer, you will likely have to sign over ownership of your entire inventory, intellectual property rights, patents, and copyrights. Some things you might be able to negotiate, such as keeping a seat on the board of directors, but other you might not. So think carefully about what this means to you and if you are prepared to move forward or willing to accept a variety of outcomes.

Getting to know and become familiar with your buyer may help address some of the hesitations you will naturally find yourself experiencing. But, ultimately, what happens to your company will be in the hands of your new buyer. And you need to be comfortable with that, or at least accept it. When you are ready to move forward, there are a lot of logistics to handle before, during, and after the sale.

The #1 Checklist to Selling A Business

Unfortunately, selling your business entails a lot more than just handing over your office keys to the buyer. You must prepare and evaluate everything connected to your brand, providing many of these details to the buyer themselves so they can perform their own process to ensure the viability of their purchase. This is a standard and necessary practice known as due diligence in which the buyer combs through every aspect of a company they are considering purchasing. Some of the common due diligence items you should be prepared to share include:

Corporate Structure & General Matters

Reviewing the structure, capitalization, organizational documents and general corporate records of the company allows a buyer to ensure your company is in order. Here are some of the documents typically reviewed:

• Incorporation documents
• Corporate bylaws
• Organizational charts
• Securities holders
• Stock option agreements and plans
• Stockholder and voting agreements
• Warranties
• Recapitalization or restructuring documents
• Minutes from all board, shareholder, and/or executive meetings
• Agreements related to the sale or purchase of any other businesses

Taxes

This process explores historical income tax liabilities and provides an analysis of all tax carryforwards along with their potential benefits. The goal is to verify that your business’s taxes are current in all jurisdictions and that there will be no unexpected tax problems after the sale. Documents reviewed generally include:

• All federal, state, local, and foreign income, sales, and other tax returns filed within the last five years
• Correspondence or notice from any foreign, federal, state, or local taxing authority
• Government audit records
• Tax sharing and transfer pricing agreements
• Net operating losses or credit carryforwards
• Settlement documents with the IRS or other tax authorities
• IRS Form 5500 for 401(k) plans

Intellectual Property

The goal of this review is to establish the extent and quality of your company’s technology or intellectual property, including its protection. This list of documentation usually includes:

• Patents
• Copyrights
• Trademarks
• Domain names
• Trade secrets
• Licenses and licensing agreements
• IP litigation and claims
• Liens or encumbrances on the company’s intellectual property

Material Assets

Probably one of the most obvious things to review is your company’s material assets and doing so is key to a successful transaction. You must consider the total value of all assets and any debts or liabilities against them. Typically, the following assets are appraised:

• Inventory stock
• Real estate
• Equipment
• Technology
• Research and development

Contracts

Your team should also be prepared to hand over all material contracts and commitments tied to your company. This process is one of the most critical and time-consuming parts of due diligence so preparing the documentation in advance can help keep the sale running smoothly. Generally, a buyer will want to review all of the contracts currently in force at your company, including:

• Customer and supplier contracts
• Schedule of accounts receivable and payable
• Guarantees, loans and credit agreements
• Agreements of partnership or joint venture
• Equipment Leases
• Settlement agreements
• Non-compete, most favored nation, and exclusivity agreements
• License agreements
• Distribution, dealer, sales agency or advertising agreements
• Franchising agreements
• Employment contracts

Some other matters that a buyer will want to look into prior to purchasing your business will include employee and management structure, benefit offerings, any outstanding litigation, applicable compliance or regulatory matters, and the overall strategic fit of your company within their own.

As you approach the close of the deal, ensuring that both you and the buyer are on the same page on every facet of the purchase can help minimize conflict during the actual transition of ownership. In some cases, you may have to schedule a final transaction meeting to sign the closing paperwork in which case it is important to clarify who must be present and where this meeting will take place.

But increasingly, the paperwork can be signed remotely by each party and couriered back and forth. Regardless, always make sure that you have had ample time to review the documents and consult with a legal and financial representative to ensure a successful transition of ownership while decreasing the risk of liability.

What to Expect After the Sale

After the final closing of the transaction, you will still have a few items to take care of before moving on. Typically, both parties involved are responsible for making an announcement of the transaction to their respective teams. In some cases, there may be specific clauses which make the agreement contingent on your delivery of certain assurances, goods, or other obligations meaning the transaction is not finalized until all items have been completed and received in good faith.

More often than not, the sale of your current business will dictate some restrictions on what you choose to do next. Many transactions include a non-compete clause or a covenant not to complete section wherein signing you agree not to create a new entity with competing interests.

How The Hatteras Group Can Help

The Hatteras Group has a long-standing tradition of partnering with businesses to set them up for success. Even if you are not prepared to sell your business at this time, our team can audit the health of your company with an advanced 10-point evaluation to determine if there are any issues that could potentially derail a sale in the future. So if you find yourself looking to sell your business, Hatteras Group can help and partner with you for the best outcome. We have been in the business of mergers and acquisitions for decades, and in our experience, we have overseen millions of dollars exchanged. An experienced team comprised of former business owners who have sold their companies, we now help others to do the same effectively and efficiently.

The post The #1 Checklist to Selling a Business appeared first on Hatteras Group.

Whether you’re planning for retirement or gearing up for your next business venture, there are a number of reasons that selling your company might be the next best move. It’s important to consider whether you have a viable plan in place to ensure a smooth and secure transition of your assets as you move on from your business toward your future goals.

There are tangible benefits to preparing an appropriate business exit strategy ahead of time. Planning ahead can help you figure out how you’re going to transition your assets, and how much money you’re going to get out of your company; it also might mean making more money from an eventual sale. Careful consideration of your financial goals and your future level of involvement in the business are key in determining which exit strategy is best.

Acquisition

If you think that your company is positioned for a buyout, then preparing an exit strategy based on acquisition can provide maximum profits and also give you the opportunity to remain involved in the business. With this strategy, you’ll be able to negotiate the price for your business, but another thing to keep in mind: there is the possibility that once your company is sold, the buyer will close the company’s doors and lay off employees.

In order to set your company up for successful acquisition, it’s important to concentrate on potential buyers and plan your strategy in advance so you don’t miss the right opportunity to sell. It’s critical to consider who’s capable of purchasing your company so that you can target these potential buyers, while not becoming so specific in your view that you limit the interest from other buyers.

Preparing for acquisition might be the most lucrative opportunity in front of you; if you’re able to position your company as a group capable of providing unique solutions, you might spark the interest of multiple buyers and boost the valued price of your company to new heights.

Continue The Legacy

Many business owners have hoped to one day pass the business and legacy they’ve built on to their family and heirs. If you can manage to keep your business in the family, you’ll have power over a number of decisions when it comes to the terms of your departure.

One advantage of keeping your business in the family is that you have the ultimate say when it comes to choosing a successor. You might also be able to work out some situation where you can continue participating in the business in some advisory role.

As you develop your exit strategy around passing down your company, It’s important to consider the relationships that your successor has with current clients and how your clients will feel about the decision. Another aspect to consider is the complications that can arise from merging family and business relationships.

If there is someone in the family that has the capabilities to continue pushing the company forward, then maintaining ownership of your business within your family can be the best way to ensure an effortless transition and continue your legacy.

Management Buyout

It makes sense that the people who have helped you grow your business might be the ones best-suited to take over operations of the company. Selling your company to your employees can make for the most seamless transition of ownership and has potential to foster a sense of loyalty around your business’ future; often times, members of your company are equally invested in the vision you have for the company.

Internal members of your company may not have the capital required to purchase ownership and often times businesses struggle after changing ownership. This strategy might also provide the opportunity for your continued involvement in the business as the company adjusts to the change and communicates these changes with existing clients.

IPO

One of the most trying strategies involves taking your company public through an initial stock offering. It may take years before business conditions are well-suited to make this exit strategy a viable option. Even while your company is achieving success in the industry, public perception of the industry will ultimately dictate the value of your company.

Taking your company public includes the opportunity for big profits and can be extremely lucrative, but the process is usually long, expensive and in the end, puts your venture at the mercy of the shareholders. These shareholders might want to use profits to expand the business rather than cut you a larger paycheck, and as a public company, you will face strict compliance and reporting standards.

Liquidation

Selling off your assets and closing your doors is likely to be a tough decision for any ambitious entrepreneur, but it may be the simple and straightforward solution you need. If you’re considering this strategy, it’s important to note that you’ll still need to payout shareholders and creditors before taking any money home. You also might start thinking about practical ways to prepare your business for new ownership such as auditing books and improving existing systems.

The downside of this approach is the commonly low return on investment and the risk of losing valuable business relationships.

One of the most appealing aspects of this strategy is that it allows business owners to make a clean break from their company. Because liquidation is final, it may give you the freedom you need to concentrate on your next project and you won’t have to worry about transitioning control of the business.

About The Hatteras Group

The Hatteras Group is a collaborative team of professional merger and acquisition advisors who create options for their clients to grow and sell companies in the middle market. We lead business owners as they navigate the complex and often emotional process of selling a business.

We represent owners who are selling their businesses, lead proprietary acquisition searches, source equity and debt, and provide business valuation services, generally working with companies whose annual revenues are $5MM to $100MM. If you ever have questions about the process to sell your business, or if you would like to explore the M&A market and plan for an eventual sale, then please contact us for a call or meeting.

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