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M&A Advisor Tip

Deal killers: The inexperience attorney

Too often business owners want their usual attorney to represent them in a business sale. But because this person is inexperienced in M&A, they tend to be slow and ultraconservative. We’ve seen buyers walk from a deal because the seller’s attorney was being unreasonable.

A seasoned M&A attorney has seen it all before. They know the language, the sticking points, and all the ways a deal can go wrong. What’s more, they understand negotiations and how to protect their client’s interests without blowing up the opportunity.

The right attorney is a deal maker, not a deal breaker, and will keep a transaction moving forward – as long as it meets your goals.

Market Pulse Survey - Q1 2022

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M&A Feature Article

Data from the Labor Department continue to show there are roughly two job openings for every unemployed person in the U.S. Meanwhile, 44% of employees are “job seekers” who are actively looking for new work or plan to soon, according to a Willis Towers Watson survey. It’s no surprise that other employers are out there looking for people to poach.

If you’re thinking about selling your business in the near future, it’s important, now more than ever, to focus on retaining your talent. That means making sure compensation is at or above market rate. More importantly, it means spending time with your employees and building a great culture.

As owners, we have to carve out more time to build connection. If you can keep your team together, you’ll have a better company and a proven group when it comes time to sell. You need to invest money into your people, just like you invest in your equipment and fleet.

Buyers are looking at turnover and retention trends. If you’re constantly in hiring mode to replace departing talent, buyers will see that as an element of risk. On the other hand, a well-tenured team can increase your business value in today’s market.

Business owners without strong leadership teams may need to consider extended transition periods to secure a successful deal. We’re representing one professional services firm, and buyers told us, “The only way we’ll do the deal is if the owner stays for three years.”

The good news is that the seller understood that transition issues would be a stumbling block in this talent market, and he came to the table prepared for a five-year plan. However, many business owners want to be out in 3-6 months, which can prove to be a real problem.

Business owners with strong leadership teams won’t need to stick around as long. In fact, a sale can be an integral part of succession planning. In deals involving private equity, we’re seeing a considerable number of buyers who are setting aside anywhere from 8-12% of the company into an incentive pool for executive non-owners.

Your management team can become minority owners of the business, through the transition. Buyers are willing to give up a percentage of the company to create those “golden handcuffs” and keep proven leaders.

Employee retention is important at any stage of business. But for owners contemplating a sale, a strong record of retention could mean significantly more value and a faster transition period.

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