Is Your Business Ready for an Ownership Transition?

The importance of early planning for internal succession or external sale

An ownership transition may be one of the most important financial events and career milestones in a business owner’s life. Planning early—whether for internal succession or an external sale—can help improve business continuity, transaction value and terms, timing and after-tax proceeds.

Below are key considerations for business owners when planning an ownership transition.

Focus on preparing financially for a transition

• Optimally organize and present company financials, potentially including a GAAP view
• Begin internally tracking key, transition-relevant financial and operating metrics
• Develop view of adjusted earnings, normalized for non-recurring expenses and costs that are not expected to continue post-transition
• Implement tax strategy to maximize proceeds from transaction

Understand what your company may be worth

Valuation is often based on a multiple of adjusted earnings or revenue, with the multiple informed by many variables, including company size, profitability, customer concentration, revenue mix and growth profile. Valuation is company-specific so owners can work with an accountant and M&A advisor to derive a custom, estimated valuation based on company financials, operations and market position, among other characteristics.

Be thoughtful when responding to inbound buyer interest

Owners should have an informed view of their financial position and valuation before negotiating with one buyer. An accountant and M&A advisor can help provide this view and potentially position the owner for a more attractive offer. When applicable, using the M&A advisor to efficiently solicit interest from other buyers can also enhance an owner’s outcome by creating competitive tension.

If you are considering succession, retirement, a sale or responding to buyer interest, we would be happy to discuss your goals and options.  K2N Advisors & CPAs partners with M&A advisor, Free Pier Advisors, as a resource for clients considering sales, capital raises and succession-related ownership transactions.

Free Pier Advisors securities-related services are offered through Finalis Securities LLC, member FINRA/SIPC.