Questions to ask yourself in business transitions – and baseball

by Doug McDonald, CPA

Baseball is a complex game that requires a combination of skills, tactics, and talents to win, but the most important factor is having a well-planned strategy. Complex business transitions, like the sale of a company, also require significant planning, coaching, teamwork, and strategy to be successful. Regardless of which season you’re in as a business owner, you need to be prepared with a winning strategy well in advance of selling your business.

What’s your game plan?

Selling your business may not be something you are thinking about now, but at some point, transitioning ownership will happen. Having a plan now helps to ensure the best outcomes later.

Recently, Abdo’s transaction advisory team stepped up to the plate to help a client navigate the complicated sale of a large, Minnesota-based distribution company. The sale of our client’s distribution business involved multiple parties, legal documents, and financial considerations. The president of the company wanted to retire, and as part of their estate planning, they needed to sell the business. Leading up to the sale, our role was to help get their accounting up to speed, work with the business broker on marketing the business through the confidential information memorandum, and provide pertinent information for the buyer.

Who’s on your team?

In a business sale, a team might consist of a business broker, financial advisor, accountant, and attorney, each with their specific expertise. Like a baseball team, a business sale team must work together seamlessly to achieve the desired outcome.

This client in this scenario had a long history with Abdo, allowing our team to coach them through every aspect of their business and learn their operations inside and out. However, the team was thrown a curve ball when the investment banker who was working on the sale had health issues. This required our advisors to take on a more prominent role in the engagement, splitting up the brokerage work including negotiating with the buyer.

A potential buyer already identified, Abdo’s team helped with supporting strategic negotiations, produced schedules, reviewed lease agreements, resolved a situation with a vendor to mitigate risk, and rewrote sections of the purchase agreement to benefit the seller’s interests. As a result, the client scored big. By working with the client’s attorney and other key players to develop a strategy and quickly resolve issues the buyer had, Abdo’s advisors helped the client realize $500,000 in additional sales price and also made the process easier for the client and their attorney.

Are you headed for the playoffs?

Just like a great coach, Abdo is a firm that believes in maintaining long-term relationships with clients and investing in their future goals. Following the successful sale of this client’s business, Abdo’s team continued advising and working with the client to make a real impact to their bottom line. Through cash planning and planning for the sales of related investments and real estate (the timing of which was critical for income tax purposes), the team was able to save the client over a million dollars in tax – in addition to the income from the sale itself. You might say it was a grand slam.

Advice from the pros

Don’t wait until you’re up at bat to start preparing for an inevitable business transition. Whether you plan on a sale, a merger, or a change in ownership, Abdo’s professionals are here to coach you, guide you, and help you hit a home run.