Ready…Set…SELL

Module 1: The M&A Process – Terms, Agreements, and Timelines

In this module, I’ll teach you the foundation you need to get started on an M&A project. We will cover a typical transaction timeline, common terms you are likely to see, and a rundown of all the agreements that make up a typical transaction.

The goal of Module 1 is to educate you enough so you don’t sound like an M&A newbie.

Module 1 Highlights:

• You will learn the six stages of a typical M&A deal and how long each stage takes, depending on who you sell your company to.
• You will learn the most common M&A terms and language used in transactions. I will review 22 terms and break them down into three areas: general terms, deal preparation terms, and transaction terms.
• You will get comfortable with the contracts that are in a typical transaction (and there are a lot of them), like: IOIs, EOIs, LOIs, and the “Definitive Agreements.”

Module 2: Your Ideal Buyer

Here, we start our deep dive into the three different types of buyers and what they look for in a seller. You will come to understand the pros and cons of each buyer type and which one you might naturally gravitate to, given your company’s skillsets. And equally important, we learn how to start THINKING like a buyer instead of a seller.

Module 2 Highlights:

• You will get to know the three main buyers who might be interested in your company, including how they look at your company and what they value.
• Next, we will take a deep dive into the pros, cons, and priorities of each buyer. After you review this lesson, you will have a good sense of which buyer type you will naturally gravitate to.
• Here, we learn how to think like a buyer and not a seller! Because guess what: they are not just focused on your top-line revenue and bottom-line net income (like sellers are).

Module 3: How to Get “Transaction” Ready

This is when we start initially assembling the contents of our virtual data room (VDR) and take a closer look at how we report our financials. We’re also going to cover the top metrics we should be monitoring now, because a buyer WILL want to see them.

Module 3 Highlights:

• We share the MUST-HAVE documents that should be in your virtual data room to be sufficient to receive an IOI or LOI from a prospective buyer.
• A virtual data room is a must. And the earlier you begin stocking it, the easier it will be. Plus, you won’t raise eyebrows from your team. We also review how to organize a VDR for easy replication.
• Regardless of your size, deals are won or lost based on the quality of your financials. We will review 10 deal killers and what to avoid when sharing financials.
• We review 4 key metrics, as well as “best in class” benchmarks you should strive for in your business. We also cover how to properly present your cost of good sold section so that your gross profit margin is correct….a key metric as well.

Module 4: What is Your Company Worth? (Calculate and Set Your Value)

Now that you know your ideal buyers and how to get your financials ready, let’s get clear on valuation – yes, YOUR company’s potential valuation!  I love this module, because we get down to the REAL numbers YOU can expect for your company!  And we learn where you are leaving money on the table.

Module 4 Highlights:

• We will cover a quick overview of general transaction values in the lower-mid market, and then look specifically at those valuations for technology service providers.
• Before we can determine your company value, we must understand the EBITDA calculation and what is and isn’t in this number. After all, all deal values are derived off of EBITDA. Here, we calculate yours!
• Just when you thought you found all of your normalizations, we cannot forget those extra COVID-related expenses, such as PPP loans, office expenses, and payroll tax deferrals that should also be added to the normalization calculations.
• Get ready to begin the Value Maximizer Assessment™. I will walk you through the assessment and what numbers you need to have ready to find your potential company value.
• Finally, we’ll review your valuation results and discuss what you can do to increase your value and minimize value gaps.

Module 5: The Anatomy of an Offer

Here, we will dissect a typical offer and all the terms you’ll typically see. Plus, we will get to understand the difference between a stock and asset sale, and which might pay out better for you. We will also take a deep dive into earn-outs (what a good one looks like and what to avoid). The goal of Module 5 is to help you get clear on your take-home cash and how long it may take to earn it all.

Module 5 Highlights:

• We review the common deal terms and structures that you will typically see in a letter of intent because, as we will come to find out, it is more about the deal terms than it is about the price.
• Now that you understand deal terms, you will learn what it takes to be a platform company (as there are certain requirements) and how that differs from an add-on or tuck-in acquisition.
• As a seller, you will have the option of either a stock or asset sale. Each have very different tax consequences. We discuss the differences between each and which one might be best for your particular situation.
• Not every earn-out scenario will work in your favor, so it’s important to understand the benefits for you (the seller) and the buyer. In this lesson, we will explore some of the best ways to structure your earn-out.
• We discuss typical transaction expenses that will reduce cash at close, as well as what taxes you can anticipate paying. We will review a typical Net Working Capital calculation as well to help determine how much money you might need to leave in the company for the new owners.

Module 6: Ready, Set, GO!

I share a checklist to follow to get ready for that never-ending due diligence phase.  Plus, we will review, in detail, what to expect with a teaser or blind profile, and what you can expect to see in a CIM (Confidential Information Memorandum). And no financial due diligence is complete without a good Quality of Earnings report, which validates our normalizations and net working capital calculation.

Module 6 Highlights:

• We review the big items that need to be ready and in place to begin taking your company to market. We will start by determining your perfect time to sell and end with how much money you need to net in order to realize your goals.
• Before you take your company to market, you need to prepare a blind profile or teaser, which allows buyers to learn more about you without disclosing who you are. We’ll show you how!
• Developing a CIM or Confidential Information Memorandum is the next step in presenting your company to prospective buyers. It is a time-consuming document to create, but oh so important!
• We will review the elements of a typical QofE report and why, in certain circumstances, you may want to purchase your own QofE and have it prepared in advance of going to market.
• I will walk you through a complete 18-point checklist of what to have ready to go to market. We will also preview 4 online portals where you can list your company and SELL ON YOUR OWN.

Module 7: Exit Stage Left or Right?

We are almost done, but we shift our focus to the personal side and the mental mind shift that needs to occur to have a happy and successful exit. We will look at what creates a happy exit vs. a stressful one, and what changes you may need to make now.

Module 7 Highlights:

• We switch our focus from the actual transaction to what factors will lead to a happy vs. stressful exit. I will give you 8 tips to ensure a successful exit, which most sellers don’t consider when selling their company.
• We review some post-sale options regarding your employment (or just leaving entirely). We also discuss the best ways to ease into life after a sale, which can be very difficult for many owners.
• We walk through the course one last time – just in case you skipped around a little and might have missed something along the way!

Bonus Module 1: Picking Your M&A Team

Want to know the secret to a successful deal closure? It is finding and leveraging the right three advisors. In this bonus lesson, you’ll learn the secret to identifying the right M&A advisor, investment banker, or broker for you to use. We give you the questions to ask to make sure you know how to dig deep. I am also giving you my best tips on how to select counsel, because OMG the wrong attorney can be a detriment to your deal! And finally, we will talk about the oh so important CPA and take a look at sales tax, including how you can look now to see if there is going to be an issue at close.

Bonus Module 1 Highlights:

• You will learn the difference between an investment banker, M&A advisor, and business broker, as well as the responsibilities and fees you can expect to pay for each type of advisor.
• There is no way you can complete a sale of your company without a competent M&A attorney. I will share with you a handy checklist to help select the right attorney…not one that just likes to redline agreements!
• A good CPA will help eliminate or reduce the amount of taxes you will need to pay on the sale of your company. But don’t assume the gal or guy preparing your personal tax return is the right person to advise you in this very important transaction. We discuss how to choose the right CPA for your deal.
• We hit on the very hot topic of sales tax and the data you will need to provide to the buyer’s due diligence team to determine if the appropriate sales tax by state has been paid.

Bonus Module 2: The Unsolicited Offer & How to Compensate Your Team

Now that we understand the M&A process and what you are worth, let’s make sure we know what to do if/when presented with an unsolicited offer. It’s exciting, but we need to stay in control. This bonus module will also give you guidance on how to handle those pesky PE calls; there is something to be learned from those calls. And finally, we need to understand the best ways to compensate our most loyal employees. We have more than one option to accomplish this.

Bonus Module 2 Highlights:

• You will learn when an unsolicited offer might be good and when it may just seem good because it is the only one you have. You will also learn what anchoring is and how many private equity (PE) firms use this tactic to attract buyers. And you will learn about the “5-20 rule” when contemplating a buyer.
• You will learn about all things PE, from dry powder to assets under management to how to take a call when PE is on the phone.
• The big day is close at hand, and you see the bounties that await you after all of your hard work starting and running your company. But what about those employees who have stuck it out with you and have been there for you every step of the way? I share some guidance on when to tell your team and other stakeholders about the news. You will also learn about the different levels of bonuses you might want to offer these important employees.

Bonus Module 3: Getting Your Financials Ready for a Sale

In this module, we are going to nerd out on financials. We will start with how to make your profit and loss statement highlight the true value of your company. And there is no better way to show value than by normalizing your income for the prospective buyer. Then we will turn our attention to cleaning up the balance sheet, as that is essential, whether you are considering an asset or stock sale. Then, we wrap up with my 10-step guide to creating projections.

Bonus Module 3 Highlights:

• Learn how to present your P&L so that is easy to read, highlights important metrics, and has a fully detailed cost of goods sold section in order to present an accurate gross profit margin.
• Uncover 8 types of normalizations and how best to find them in your own financials. Plus, I will share with you my 10 tips on how to uncover these gems within your financials. You will learn that normalizations go way beyond just adding back personal expenses.
• I share the key areas to focus on when paring down your balance sheet, whether you’re selling assets or stock. We will also look at expenses that should maybe be considered prepaids to help increase your value, as well as deferred income.
• Buyers want to see how you will end the year. So, we need to show detailed and accurate projections that are believable and achievable. I give you ten quick steps (that don’t require a CPA) to prepare a set of projections based upon last year’s actual numbers.