Team Building in the Purchase & Sale of a Privately Held Company

Aug 19, 2015

The long road to the 50th Super Bowl recently commenced in the NFL with the start of training camps around the country. The key to a successful season in the NFL is a team building two strong units (Offense & Defense) where a spectrum of individuals from coaches to players to support staff work together as a cohesive group with everyone contributing effort, knowledge, and experience. It is common for teams to have one strong unit, but it traditionally requires that both groups perform at a high level to become Super Bowl champions. Successful completion of a transaction involving the purchase & sale of a privately held company also requires that two strong teams are assembled.

The transaction teams assembled by the seller & buyer traditionally each have an attorney and accounting professional. It is IBA’s recommendation that both parties employ professionals with significant experience & knowledge related to the purchase & sale of privately held companies. The legal & accounting road traveled in a transaction is a fairly standard path. A party selling or buying a company should employ professional advisers that can convey what is standard for the size & industry of the transaction being contemplated, what are “best practices” and “optimum deal terms” for their client, and “middle ground” solutions that can be achieved in a “good faith” negotiation. It is our recommendation when selecting an attorney or accountant that the party understand the estimated cost for the project and the level of relevant experience & knowledge. For example, representations, warranties, and indemnification are traditional battle grounds for opposing legal counsel in a business sale transaction. A conversation regarding prior solutions employed to address flat versus conditional representations relevant to the potential transaction can be illuminating in determining if the professional is appropriate for the situation by a party. Similarly, a conversation with an accountant about tax allocation and the due diligence process can determine if the professional has the experience & knowledge necessary to represent the party.

IBA, as a sell side business brokerage firm, traditionally represents the business owner selling the company and is part of the seller’s team. A majority of the time the buyer does not employ a business broker in deals facilitated by IBA. This commonly occurs because entrepreneurs buying companies frequently want to control & facilitate negotiations directly on their behalf. They also know that they have a CPA on their team to help with business valuation & due diligence and an attorney to address liability issues. IBA welcomes participation of sell side brokers in the transactions it facilitates and will share commission with brokers that initiate contact with IBA on behalf of their client and demonstrate the knowledge, experience, and ethics appropriate for the sale of a privately held company in an environment of full disclosure where “best practices” are employed.

A common team member on the business buyer’s team that does not have a counterpart on the seller’s team is a bank. A bank is a transaction participant that both parties view as valuable. Interaction with the bank is collaborative and intended to achieve the common goal of funding the acquisition that benefits both parties. IBA recommends that buyers select an experienced banker to work with that has a track record of successfully financing similar transactions in a timely manner at competitive market terms.

The above identified professionals are the most common team members employed by sellers & buyers in transactions involving the purchase & sale of privately held companies. Consultants, wealth management professionals, 1031 exchange facilitators, and appraisers are often added for their special expertise. The key is for each party to build a knowledgeable, experienced team that will work collaboratively with the other side of the table to achieve the common goal sought by the parties. IBA’s ability to build that collaborative work environment is one of the fundamental reasons for our success as intermediaries facilitating business sale transactions in the “middle market”.

IBA, the Pacific Northwest’s premier business brokerage firm since 1975, is available as an information resource to the media, business brokerage, and mergers & acquisitions community on subjects relevant to the purchase & sale of privately held companies and family owned businesses. IBA is recognized as one of the best business brokerage firms in the nation in terms of successfully negotiating transactions that are “win-win” in an environment of full disclosure between the parties.