DOs and DON'Ts of Selling or Buying a Business
helping businesses grow and prosper for over 16 years. He works
with Canadian and foreign mid-market companies on a wide range of
business legal issues from day-to-day commercial agreements and
employment contracts, to more sophisticated transactions including
mergers and acquisitions, corporate financing and succession
planning. He also assists companies looking to do business in
Canada, advising them in setting up their operations or buying a
Canadian business.
2000 - 145 King Street West
Toronto, Canada M5H 2B6
416.362.3411 Phone
416.362.3757 Fax
mhenry@houserhenry.com
www.houserhenry.com
exciting and rewarding experience.
year or less to achieve, planning should
begin well in advance, even before it's
a firm thought. Optimal results can
be achieved for both buyer and seller
with flexibility and creativity, careful
preparation and strategic planning. The
following includes tips for both parties
to ensure a successful transaction.
Maximize the Business Value
ing what they want the sale of their busi-
ness to achieve. It is important to think
through the implications for the seller
personally, for their family, their employ-
ees, their key customers and suppliers.
An owner often derives a great deal of
self-worth and purpose from the business.
of the business and visualize what he will
do with his time.
How will the seller's financial situ-
ation be affected by the sale? Often a
seller's wealth largely depends on the
business, and he will need help with
the transition from receiving an income
stream from the business, to generating a
reliable income from investments.
Business for Sale
price in mind, a business is really worth
whatever a buyer is willing to pay. Sellers
need to have a realistic value of their
business at the outset. They should look
at and evaluate their businesses as if they
were an outside buyer, and employ expert
help to determine the fair market value
of their businesses. A valuation should
highlight the strengths and weaknesses
of the business.
nesses, such as improving profitability,
building a better repetition, diversifying
customers or products, building a man-
agement team, reducing debt or upgrad-
ing processes. Unfortunately, some sellers
do not prepare their businesses for sale
and, should they be forced to sell during
a crisis, in these cases they inevitably
sell for less than the business could
be worth.
An owner can anticipate a buyer's due
diligence by performing searches against
both himself (as the seller) and the busi-
ness. The results can uncover issues
which can be addressed early on in the
process, such as discharging any old se-
curity registrations against the company's
assets and settling outstanding litigation.
Dealing with these issues early paves the
way for a smooth negotiation and closing.
facilitate a smooth sale, a seller and his
advisory team should take several steps:
have a minimum five years' worth of
complete financial statements for the
business. Make sure all business tax
returns have been properly prepared