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Getting Your House in Order

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In this presentation, Eric Duffee discusses common pitfalls and organizational and operational strategies to adopt prior to engaging in the sale process.

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Getting Your House in Order

  1. 1. Presented by Eric DuffeeGetting Your House in Order
  2. 2. HISTORY
  3. 3. Project ODYSSEY Fragile relationships with disbursed group of employees, who in turn had all of the relationships with customers—all of them could literally just drive away Required significant and unpredictable interactions with third parties Deal team didn’t know all of the facts but weren’t comfortable bringing others into the circle of knowledge
  4. 4. Project WALRUS Inefficient tax structure Nobody knew who actually owned the company Significant delays to deal with issues that could have been addressed prior to the sale—by the time they were fixed, the 2008 recession hit
  5. 5. Project GAME OVER Software company but didn’t have any intellectual property protection or real business continuity plan Internal deal team didn’t have the bandwidth to keep up Compliance programs weren’t adequate for the scrutiny of a big, public buyer
  6. 6. Ugly Financials 1
  7. 7. Wrong, Convoluted, or Unknown Organizational Structure2
  8. 8. Uncertain Relationships with Customers, Suppliers + Employees3
  9. 9. Lack of Adequate Intellectual Property Protection4
  10. 10. Loose Lips Sink Ships 5
  11. 11. Cutting Corners 6
  12. 12. Third Parties 7
  13. 13. Unjustified Delays 8
  14. 14. Unwelcome Surprises 9
  15. 15. So what if my deal falls apart? I still have my business!
  16. 16. Yes, but you may be viewed as “damaged goods” by: Your customers and/or suppliers Investors and other financing sources Potential suitors Your employees There is also a physical and emotional toll
  17. 17. Buyer’s view: Transaction price depends largely on risk
  18. 18. All business have some warts! The key is how you address them
  19. 19. What can you do to minimize the chances of your deal going down in flames?
  20. 20. Think like a buyer! Choose an organizational structure that sets you up for success Financial clean-up: audits or quality of earnings (QoE) analysis Protect/incentivize key employees Pay attention to ownership issues now Identify and protect intellectual property assets (of all types) before a deal
  21. 21. Protect key customer/supplier relationships Control the flow of information Do your own due diligence review Prepare to do two full-time jobs: run and sell the business Strategically assess risks and address them Identify warts and determine how to strategically disclose them
  22. 22. Why not just wait to see what happens when the buyer shows up?
  23. 23. Maximize use of the seller’s leverage while you have it Preserving credibility Encouraging trust Sending a positive message about how you’ve run the business
  24. 24. Eric D. Duffee Kegler Brown Hill + Ritter eduffee@keglerbrown.com keglerbrown.com/duffee 614-462-5433

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