Drafting Your Sale Transaction Team

For most business owners, selling the company you’ve spent years building is a once-in-a-lifetime, life-changing event. It’s your personal Super Bowl. Yet unlike NFL teams that have dozens of analysts helping them choose the best players to draft to create that championship-level team, many business owners are unfamiliar with the team of advisors they need to assemble to get their sale transaction across the goal line. Selling your business is a complex, time-consuming transaction; unlike selling, say, your house, you’ll likely need multiple specialists to ensure the best outcome for you and your company. Below, we share the most common types of advisors that business owners draft to their sale transaction team:

Starting Lineup

These are advisors you’ll find in most transactions.

Investment Banker

This is often one of the first advisors business owners seek to hire if they want to run a full auction process to sell their company. The investment banker you choose can make or break your transaction; we think it’s so important that we dedicated an entire blog post to how to choose yours here. Your investment banker should walk you through the process and timeline and help you prepare your data in advance, give you an idea of how buyers will value your company, vet potential buyers, and will typically act as the primary point of contact for the rest of your advisor team for transaction matters (think of them as your Quarterback or Team Captain).

When drafting your investment banker, take into consideration areas like their experience and track record for successful transactions, how accurate they historically are in terms of their valuation guidance, how embedded they are in your specific industry and if they already have relationships with potential buyers, and how proactive they will be in leading you through the entire transaction process.

Attorney

The attorney on your transaction team will work with your CPA to advise on the legal structure of the transaction, and take the lead role in drafting and negotiating the purchase agreement. Because of this we recommend you draft an attorney that has M&A experience. This agreement is vastly different from other legal documents that non-specialized attorneys typically work on (such as leases, contracts, divorces, or employment agreements). The terms are more nuanced and complex; as the seller, you want to ensure that what you’re legally agreeing to is something that you can stand behind and that also protects your interests. Additionally, there are established market norms for most of the legal points in the purchase agreement. An experienced M&A attorney will often lead to a smoother sale process as compared to an attorney with another specialty who is moonlighting as an M&A attorney.

Your attorney’s transaction experience can also significantly impact the timeline of the sale. For attorneys that have never worked on a purchase agreement, for example, there will likely be some unfamiliar terms that they will need to take time to research or corroborate with colleagues prior to completing their review, which can result in weeks passing before any comments or changes are turned back to the buyer’s attorney. With an M&A attorney, not only will they have familiarity with these terms, but they can also help advise you on which are standard and which are less material to you (saving your negotiating power for the important terms). Finally, while many sellers wait until the letter of intent is signed before engaging legal counsel and there isn’t necessarily a right or wrong decision with regard to timing of engaging your attorney, we recommend that sellers involve legal counsel in the drafting of the letter of intent. This allows your attorney to have input early and will often make the process of drafting the purchase agreement and other definitive transaction documents smoother.

CPA/Tax Advisor

You’re likely already familiar with the value a CPA or tax advisor brings to your day-to-day business; their role only increases when you look to sell your company. Your CPA takes center stage when it comes to advising on the implications of and negotiating different proposed legal and tax structures a sale transaction can take, and will work to minimize your tax burden post-closing.

As with your attorney, it’s important to engage a CPA with experience in M&A transactions and who understands tax structuring in a deal (this may or may not be a different person than the CPA you use for your business accounting). Because the tax structure is typically not mutually exclusive in terms of being advantageous to either the buyer or the seller, a tax advisor who understands the tax implications for all parties can be instrumental in negotiating an optimal solution for both you and the buyer (keep in mind that a buyer takes into account the tax structure and associated costs to them when determining purchase price, so it’s still in the seller’s best interest to look for a mutually-beneficial structure).

Your CPA or tax advisor should be identified and involved well before the transaction negotiations begin, as they also play a role in helping prepare the company for sale. This can include reviewing and confirming all tax filings are in order and ensuring that your company’s current legal tax structure is optimal for your transaction goals.

Wealth Manager

Upon closing of the transaction, many sellers receive the most significant cash inflow of their lifetime. Drafting the right wealth manager will help ensure that you have a plan for how to protect the new liquidity. In fact, in many cases, your wealth manager may play a critical role in leading to the decision to sell in the first place as a path towards your financial goals. They may even be able to make introductions to some of your other advisor team members such as your investment banker, or even be able to introduce you to credible prospective buyers. Because of this, most business owners will typically already have an established relationship before any sale transaction. For similar reasons, you should be choosing your wealth advisor based on their track record of protecting and growing wealth for their clients, rather than anything related to a potential sale of your company.

Once you are in the transaction phase, beyond creating a plan for your proceeds, your wealth manager can also work with your CPA to mitigate your tax liability in the year of the sale. At the outset of the transaction, you should convey your vision for your life post-closing. Do you have plans to purchase major assets or otherwise alter your lifestyle? Do you want to continue your life mostly as it was before the sale? All of these can be impacted by transaction terms like how much equity you roll (i.e. what stake of continued ownership you keep in the business), any seller financing, or how much cash will actually be released at closing. Your wealth advisor will help ensure that your vision for your life post-closing is achievable based on the terms in your sale transaction.

Bench Players

These advisors are either less common or have a smaller role in most transactions, but still have an important role to play in achieving your goals. In many cases, their involvement (or lack thereof) can either speed up or delay your transaction.

Some of your existing advisors or service providers fall into this camp, such as your insurance broker, who will likely need to provide policy information and loss runs during due diligence, and your landlord, who will likely need to consent to the lease transfer. Some will be industry-specific, such as heavily-regulated industries where you will need someone specialized in the licensing requirements to help with all of the required filings.

While the exact makeup of your ideal transaction team is unique to you and your company, the players we’ve identified here are typical of most transactions, and all play a significant role in helping you cap off your successful career spent building your company with a championship-caliber sale transaction.