Keys to Navigating the Buy/Sell Highway

Are you considering selling your business? If not now, a bit further down the road? Whether you are expecting a leisurely drive with the top down or a rally-car cliff hanger, some special insights can help you avoid wrong turns and dead ends.

WHAT’S MOTIVATING YOUR MOVE?
It is always better to have as the reason for your sale, thoughtful planning for the good of your family and employees rather than finding yourself on the dreaded “D List” (Disenfranchisement, Default on Debt, Divorce, Disability, or Death). Whatever the motivation, careful analysis of your circumstances, clarifying your transition goals, and engaging skilled advisors will enhance your potential for a successful succession.

EARLY TRIP PLANNING CRITICAL. When anticipating a trip, just as you need to know road conditions and have navigation aids, the succession highway requires informed pre-planning — impromptu excursions can lead to unexpected results. If you start at the last minute, many of the resources and planning tools will no longer be available. Various types of trusts, gift giving, long-term purchase and sale agreements, deferred buy outs, and other mechanisms that can save you money and ease the burdens of the trip often cannot be capitalized on without advance planning.

POP THE HOOD & CHECK YOUR TIRE PRESSURE. How prepared is your vehicle for this journey? As you head on down the road, are you hearing strange noises that suggest difficulties ahead? Do you have significant liabilities such as tax or employee matters? Can you safely make the buyer’s requested representations and warranties? Are there any undesirable long-term contracts? Any third-party consents required? Have you taken care of personal items previously run through the business so that you can avoid add-backs required by the buyer?

ROAD WORK NEXT 10 MILES. Having determined where you want to go and inspected your vehicle, now is a great time to inventory and review all of the governing documents for the business (e.g., Articles of Incorporation and other state public records, tax filings, Bylaws, Operating Agreements, and Buy-Sell Agreements), as well as any estate planning or other succession planning documents. If documents were drafted but never signed, add those to the stack for review and receive the benefit of any “hindsight” since the drafts were prepared. Have you changed lawyers since important documents were drafted or signed? Make sure your current counsel has access to those files. It is a uniformly unpleasant and commonly expensive experience to be in the midst of a business sale (or owner divorce) and be faced with a claim from a former employee (or spouse) based on a signed document no one else remembers. The focus of the succession contracts should be an orderly internal transition or sale to a third party. For example, what will trigger buyout rights? How much will be paid, when, and to whom? How will payment be secured? Would life or disability insurance help provide buyout liquidity and working capital during transition?

ARE WE THERE YET? Gifting of ownership and related estate planning are best accomplished when transition is still hypothetical, and not immediately after signing the letter of intent to sell the business. Your best move is to start the discussion early and to involve your attorney, CPA, or other tax advisor, mergers & acquisitions intermediary, insurance advisor, banker, and wealth management planner.

HAPPYLAND: NEXT EXIT. Although Confucius (551–479 BC) is widely credited with the following quote, our money is on Bill Murray (1950- AD): “And remember, no matter where you go, there you are.” So, why not get underway? Beep Beep.

Tiffany & Bosco P.A. \ Law Firm (tblaw.com)

james headshotJim O’Sullivan

For over 30 years, Jim O’Sullivan has guided businesses and their owners through their most important stages: from business formation to succession planning and sale transactions, including negotiating and preparing agreements to strategically grow and protect the business, as well as their other trusted advisors, Jim provides practical, experience-tested solutions in meeting their toughest legal challenges and seizing valuable business opportunities.

In addition to his strong reputation for advising businesses in general, Jim is also widely known for his experience in representing professional service entities, including medical, legal and accounting firms.

Jim’s commitment to bringing high quality cost-effective advice to entrepreneurs led him to create and chair “Honey, I Shrunk the Documents,” a 2017 seminar co-sponsored by the State Bar of Arizona, the Arizona Society of CPAs (ASCPA), and the Alliance of Merger & Acquisition Advisors (AM&AA). Jim is a member of the American Bar Association’s Mergers & Acquisitions and Middle Market and Small Business Committees and is actively serving on their Joint Task Force to create a short-form agreement for sales of privately-owned businesses. He also received the 2016 Champions Award from the M&A Source and is a member of the AM&AA.

Listed since 2013 in The Best Lawyers in America for Closely Held Companies and Family Business Law, Jim was one of the drafters of the revised Arizona corporate statutes and is a co-author of Arizona Corporate Practice, a two-volume treatise for attorneys which continues in publication by Thomson Reuters for over 20 years.

mary lu headshotMay Lu

May Lu serves the transactional needs of businesses and their owners by assisting them with business formations of limited liability companies and corporations, sales and purchases of businesses/mergers and acquisitions, reorganizations (such as conversions sand domestications), recapitalizations, succession and exit planning strategies, general business planning, joint ventures, owner agreements such as operating agreements, buy-sell agreements, and shareholder agreements, and other commercial agreements. She also provides guidance to businesses concerning business divorce, disputes among owners, and related fiduciary duties. In addition, May assists clients with regulatory and governance issues related to the U.S. Small Business Administration and other federal, state, and local programs.

May was selected in 2021 by her peers for inclusion in the 27th Edition of The Best Lawyers in America© for her work in Corporate Law. In addition, she has been recognized as one of the Super Lawyers Southwest Rising Stars since 2012 in the area of Mergers and Acquisitions. She is actively involved with the Short Form Model Acquisitions Agreement Joint Task Force of the Mergers and Acquisitions and Middle Market and Small Business (“MMSB”) Committees member of the American Bar Association’s Business Law Section. In September 2020, she was appointed Co-Vice Chair of the MMSB Committee for a 3- year term.