40 FAQs: Creating a Business Sale

The beginning to reach an end, which is a deal, but first it needs to be the right opportunity. It is best to identify this by the time the first meeting is complete, or the sooner the better primarily due to the factor of time involved. The consideration here is that the seller has diligently prepared for the sale in terms of information that will support the value of the proposition.

There are several questions when beginning the merger and acquisition (M&A) process for buyers and sellers involved in the sale. Business owners on both ends determine areas related to revenue, expenses, and growth (and projected growth) as a result of prospectively combining businesses with core competencies by adding services, staff, work space, products, inventory, equipment, machinery, etc.

The continuation of the business and operations will include a lease or purchase of commercial real estate, or can include some combination. Who is moving where and how much space do we we need come into play. The length of the lease can be a determining factor from the standpoint of capability to exit the lease with approval prior which also relates to ability of some buyers to accomodate. Some business owners buying a business may first have an interest in leasing office space prior to buying commercial real estate. A purchase right by the seller to the buyer can be agreed upon in the event of a commercial property sale. Commercial space available for future growth needs will determine the options as well. 

Dependent on the situation, business, and nature of the sale the following options include:

•   Lease reassignment to buyer
•   Purchase of existing office space by buyer
•   Seller moves to buyer premises
•   Moving both locations into new space whether lease or purchase

Provided below are 40 commonly asked questions for the M&A process. These questions will provoke thoughts to others related questions dependent on the sale and individuals involved. Thinking like the other party is important, so a question for buyer or vice versa has an impact or opportunity for the other party. Questions to arise from the below may result in the following:

•   Requesting more information to get more detail
•   Gathering facts to overcome objections
•   Negotiating items
•   Working toward a mutually beneficial deal overall

Answers to these questions vary and are dependent on aspects of the sale for the specific to the business opportunity.

1. What is the tangible and intangible value of the business?
2. What assets are being sold and what assets are not?
3. What percent of products and services account for revenue?
4. What is the down payment? Is there a risk of a small down payment?
5. Where will the down payment come from?
6. How will the business owner selling be paid for the business?
7. In what amount of time will the purchase pay for itself?
8. How do I know this is the right business opportunity?
9. Who are the best buyer candidates for my business?
10. Should the name of the business stay or change?
11. Will customers transition easily and which customers will not?
12. How much time should be accounted for transitioning clients?
13. How will we implement staff and what will their responsibilities be?
14. What options now exist for employee health and other related benefits?
15. What business expenses can we reduce in the result of a sale?
16. How will lenders see the transaction?
17. How much will a lender loan? Interest rate for down payment?
18. How will the sale be approved by the bank? How long?
19. What are the bank requirements? What do they require?
20. What happens to a revenue decrease or increase after the sale?
21. What is the transition strategy?
22. When should due diligence be conducted?
23. What is a Letter of Intent (LOI)?
24. What is the purpose of the LOI and what details should be covered?
25. How should customers view the sale?
26. Is it necessary for the business owner to transition the business?
27. In what amount will the owner be compensated after the sale?
28. Do non-competes exists?
29. What changes will occur related to business and operational policies?
30. What are the lease contingencies?
31. What is the appraised value of the commercial real estate?
32. How much space is needed after a purchase? Room to expand?
33. What lease options exist and will the business be moved?
34. How far can the business be moved?
35. What indemnification is availabe to buyer and seller?
36. What are the goals of both parties for the closing date?
37. What is the effective closing date?
38. What is the role of my attorney and CPA?
39. What objections can arise from the attorney or CPA?
40. What exhibits should accompany the Purchase Agreement?

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