Business? Teaming Up With the Best Professional Advisors To
The Role of the Broker, Accountant, Attorney, & Client
A broker really can add value. The accountantıs input and involvement
are essential, and legal counsel can "make" and not
"break" the deal.
Selling a business is a team effort. The clientıs strengths are often
judged based on the knowledge and ability of his professional advisors. It is important that each team member
has the right education, training and experience, along with a high degree of
integrity and professionalism.
The following is a brief description of the role that each
professional advisor and the client plays in a business sale transaction.
Prepare marketing document to present to prospective buyers.
First impressions are very important. The marketing document needs to be a first class
document. A good business broker will make every effort to fully understand the value of the
business so the business can be presented it in its best possible light. The marketing
document will contain important financial information; therefore, it
is important that the broker have a strong financial background and be
able to work closely with the accountant in preparing this information.
Find the buyer.
Clients often ask if they need to use a business broker to sell their business. Based on my
experience, a good business broker will not only add value to the business, but will greatly
enhance the possibility of completing the sale. Using a broker substantially
increases the odds of having multiple buyers bidding for the business
which generally results in an increased sales price. Brokers have
access to extensive resources that allow them to identify qualified
buyers. Prequalification of buyers by the broker helps the client
avoid wasting time dealing with parties who would like to do a deal
but really have no ability to do so. Top^
Communicate and negotiate.
A skilled broker can make a big difference in the negotiation process. As a lawyer, I am
required by professional rules of conduct to communicate through buyerıs legal counsel. The
broker can communicate directly with the buyer. This line of communication can
be much more effective and is absolutely essential.
Value the business.
Clients may either overvalue or undervalue their business. Overvaluation can result from
unrealistic expectations or emotional attachment. Undervaluation generally results from a
lack of familiarity with the marketability of the business or overall industry
trends. A seasoned business broker who is involved in the purchase
and sale of businesses every day can provide the client with a realistic sales price range. Realistic expectations will have a
major impact on the ability to successfully complete the sale.
Provide tax and financial analysis.
The CPA will generally have the greatest familiarity with the clientıs financial and tax status.
The CPA should be a valuable resource for financial information, financial analysis and tax
planning relating to the transaction. Top^
Participate in preparing marketing document.
The CPA should play an integral role in preparing the financial information for the marketing
document. Most privately owned companies minimize net income in order to minimize taxes.
The company will need to revise or recast its financial statements to
reflect increased historical net profit and cash flow as well as
future net profit and cash flow. Top^
Provide ideas and alternatives.
The facts and circumstances are different in every transaction and it is definitely to the
clientıs advantage to have an accountant and an attorney who can work well together to
structure a successful transaction and to minimize taxes.
Act as the voice of reason.
Many clients look to their CPA as a trusted business advisor in addition to someone who
can provide tax and accounting services. An experienced accountant can serve as a good
sounding board for the client on the basic business points of the transaction.
Value the business.
Offers for the same business can come in all different shapes and sizes. The CPA can
assist the client by providing an opinion as to the estimated value of the company and help
assess the true value of different offers. This type of assistance is especially important
where there are long-term payouts, performance payments and other
arrangements that require detailed financial analysis to determine not
only how the payout will operate over a period of time, but what its
estimated current value is. Top^
Review agreements and schedules.
The CPA should review and approve the financial representations and warranties made by the
client and should also make sure that any schedules dealing with financial and tax matters
are accurate. The client should work closely with the CPA to prepare the financial
information that will be part of the acquisition documents.
At a minimum, the attorney should have a strong tax background and specialize in the area
of mergers and acquisitions. Each part of the various acquisition documents will involve
unique legal, financial and tax issues. The attorney needs to have the skill and experience
required to identify those issues and to make sure that the documents
are written in a way that accurately reflects the transaction and
adequately protects the client.
Selling a business involves balance sheets, income statements, cash
flow statements, projections, financial ratios, evaluation methodologies and many other financial, tax and
accounting driven issues. The attorney needs to have a strong financial, tax and
accounting background to understand the transaction in order to accomplish the clientıs objectives.
Act as the Coach or Guide.
The attorney should explain the sequence and importance of the various steps in the
transaction, what the client should expect and how the client should deal with each step
along the way. Experienced M&A counsel can help the parties stay focused on the most
important issues and avoid expending time and energy, and the clientıs money, on
issues that may be of little or no consequence.
Many times the client will need to look to the attorney as the primary advocate and
negotiator in structuring the transaction. The attorney and the broker should both be strong
and effective negotiators and advocates for the client.
Undertake tax planning and analysis.
The attorney and CPA should work together to structure the transaction in a way that
minimizes taxes. It is important that the attorney have a thorough understanding of the
business / corporate and securities issues as well as the tax issues and be able to identify
where the expertise of other professionals may be required. Equally
important will be the attorney's ability to clearly translate and
interpret the issues in a way that the client can quickly and easily
Prepare Letter of Intent.
A Letter of Intent should be prepared by legal counsel which sets forth the basic deal points.
The Letter of Intent will serve as the foundation for the transaction, therefore, it should be well
thought out and properly prepared. Top^
6 Marshall due diligence.
The due diligence process can be extremely disruptive to the business. Legal counsel should
work closely with the client to control the degree of and manner in which buyers conduct due
diligence. Timing, location, confidentiality and procedures
associated with due diligence all need to be addressed with a
great deal of care. Top^
documentation and schedules.
Seller's counsel will generally prepare selected acquisition
documents. In addition the client will be required to prepare
numerous exhibits and schedules (with the assistance of legal
counsel). The exhibits and schedules are an integral part of the
acquisition documents. The attorney needs to make sure that the
schedules are accurate and properly tailored to provide the
requested information in a way that will minimize any potential
future liability. Top^
The attorney should bring a positive, solution oriented attitude
to the transaction and not an adversarial approach. Building
good relationships generally translates into a more favorable
deal for the client. Top^
Captain and Most Valuable Player.
The buck stops here. Everyone else can plan, advocate and
negotiate, but the client is the final decision maker. The
client needs to provide clear direction to his professional
advisers and make sure that he demands clarification on any
issues that he does not understand. Top^
The client will need to be very careful in allocating his time
to avoid spending too much time on the sale and neglecting the
continuing operations of the business. The sale of the business
is generally very distracting and will require a great deal of
extra effort on the part of the owner and selected key
Selecting the team.
The client is responsible for selecting the professional
advisers who will safely and successfully guide him through the
merger and acquisition maze. The team will usually be selected
based upon referrals from other trusted business acquaintances.
Clients should, however, make some of their own inquiries about
the advisers referred to them. Ask the referring party what
their relationship is with that advisor and why he believes that
he or she is the best person for the job. Clients should also
not hesitate to ask their attorney, accountant or broker about
their education and experience and should get referrals from
other clients. Top^
Planner, Money Manager & Financial Planner
A good estate
planning attorney should be involved before the transaction is
completed (or, if possible, before it is initiated) to make sure
the client's estate plan will operate with the least amount of
tax and government intervention possible. A financial planner
can assist in providing a personal financial plan to accomplish
the seller's lifestyle objectives and a good money manager can
maximize the growth of the sales proceeds. Top^
Roger L. Neu
This brochure was prepared by the Law Offices of Roger L. Neu, Inc.
Mr. Neu specializes in privately held company mergers and acquisitions. With over 20 years of experience, Mr. Neu
has been involved in successfully completing mergers and acquisitions for over
150 privately held businesses. Mr. Neu was a CPA with Price Waterhouse, later attended Loyola Law
School, graduating with honors, and worked with a large Orange County law firm for four
years before establishing his law firm in 1982.
Law Offices of Roger L. Neu, Inc.
Specializing in Mergers and Acquisitions, Entity Reorganizations,
Business Contracts, Capital Formation and Business Tax Planning
Phone (949) 863-1700 | Fax (949) 863-1701 | 2040 Main Street, 9th Floor | Irvine, CA 92614