Part of the webinar series: BUSINESS ADVICE - FROM STARTUP TO SALE 2021 A Startup is the Founders’ baby - they dream it, created it and worked tirelessly to make it successful. Deciding it may be time to sell all or part is the easy part - acknowledging and addressing the financial and emotional issues can be challenging. Negotiating with potential buyers or investors is time intensive, to say the least. Positioning a business for a value maximizing transaction requires planning. What professionals need to be engaged? How do the parties come to a valuation? What is the profile of the likely investor or buyer? These are just some of the questions this webinar addresses.

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Practical and entertaining education for
attorneys, accountants, business owners and
executives, and investors.

4. Disclaimer
The material in this webinar is for informational purposes only. It should not be considered
legal, financial or other professional advice. You should consult with an attorney or other
appropriate professional to determine what may be best for your individual needs. While
Financial Poise™ takes reasonable steps to ensure that information it publishes is accurate,
Financial Poise™ makes no guaranty in this regard.
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5. Meet the Faculty
MODERATOR:
Norrie Daroga - Sugar Felsenthal Grais & Helsinger LLP
PANELISTS:
Ada Nielsen - The Peregrine Maven Group
Bruce Werner - Kona Advisors LLC
Rita Garry - Robbins, Salomon & Patt, Ltd.
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6. About This Webinar: Roadmap to Selling a Business or
Taking on Outside Investors
A Startup is the Founders’ baby - they dream it, created it and worked tirelessly to make it
successful. Deciding it may be time to sell all or part is the easy part - acknowledging and
addressing the financial and emotional issues can be challenging. Negotiating with potential
buyers or investors is time intensive, to say the least. Positioning a business for a value
maximizing transaction requires planning. What professionals need to be engaged? How do
the parties come to a valuation? What is the profile of the likely investor or buyer? These are
just some of the questions this webinar addresses.
Each Financial Poise Webinar is delivered in Plain English, understandable to investors, business owners, and
executives without much background in these areas, yet is of primary value to attorneys, accountants, and other
seasoned professionals. Each episode brings you into engaging, sometimes humorous, conversations designed to
entertain as it teaches. Each episode in the series is designed to be viewed independently of the other episodes so that
participants will enhance their knowledge of this area whether they attend one, some, or all episodes.
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7. About This Series: Business Advice – From Start Up to Sale
Startups begin with an idea and a dream, which germinates into a plan, and eventually
becomes your full-time job. “Owning” a business does not make one an entrepreneur; many
professionals (lawyers, doctors, real estate agents, trades) offer services and get paid for their
skills. Owning a start-up is about turning an idea into a specific product or service, meeting
several milestones in disparate areas of expertise, and learning how to deal with “false-
bottoms” and “imaginary summits” that accompany the many failures and accomplishments
Founders experience. Startups require a blend of advisors and partners, who ebb and flow
through the Founders’ lives. Data demonstrates that Startups that have more than one
Founder have considerably higher odds of being successful, indicating a strong need for
support, encouragement and honest feedback that can only come from someone who is
sharing the same highs and lows. Finance and legal expertise are early skills that most
Founders require assistance with, then product design and development, sales and
marketing, team building and retention, funding, customer support …. The boxes are many
and need to be checked off multiple times in a Founder’s journey.
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8. Episodes in this Series
#1: Turning an Idea or Product into a Business
Premiere date: 4/13/21
#2: Roadmap to Selling a Business or Taking on Outside Investors
Premiere date: 6/8/21
#3: Roadmap to Growing Your Business by Acquisition
Premiere date: 7/13/21
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9. Episode #2
Roadmap to Selling a Business or Taking on Outside Investors
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10. Sales Considerations
• Value
 How can you increase value (Discount Inventory)?
 Is there a season that presents the best price (Holiday retail sales)?
 What valuation method is appropriate (EBITDA, Gross Sales, IP, FF&E)
 Cap Ex – invest now or leave to buyer?

11. Sales Considerations
• Payment Form:
 All cash
 Finance sale (take back a lien on your “old” company)
 Earn out (get paid from future performance)
 Stock in Buyer’s existing company
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12. Sales Considerations
• Professionals – Who Do You Need:
 Will a lawyer, accountant or tax advisor generate value?
 Does a business broker make sense?
 How do I find the right buyer?
 What if I already think I know my buyer and have an offer?
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13. Identify Issues and Fix Them
• Prepare the Company - Perform “self” diligence to identify potential issues:
 Corporate records: are they in order and up to date?
 Taxes current (returns filed) at close (IRS, FTB, BOE, Payroll, etc.)?
 Benefit plans in place and fully funded (401(k) or pension liabilities)?
 Deferred maintenance: “wants” versus “needs” – good use of cash?
 Pending litigation
o Plaintiff – who gets proceeds awarded post-sale?
o Defendant – who pays costs / damages?
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14. Identify Issues and Fix Them
• More “self” diligence items:
 Lender transfer / assumption issues
o Personal assets pledged to lender? Release possible?
o Key Man provisions
 Guarantees that need releases?
 Pending litigation with material risk to the entity?
o Indemnification? D&O tail policy?
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15. Why Hire a Professional?
• Sale Price / Value dictates the type of selling professional:
 Business Brokers
 Investment Bankers
• Advantage of a selling professional:
 Access to buyer database – speed in vetting buyers
 Expertise – ability to assist in positioning company
 Confidentiality
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16. Types of Buyers
• Strategic
 Competitor seeking synergies, increased market share, additional product offerings
• Financial
 Platform – seeking to make money
 Want strong management and market share; ability to grow
 Add-on – increase product offerings / market reach / access your customers; unlikely
to keep upper management
 Turnaround – buying to “fix” and increase profitability
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17. The Buyer’s Perspective
• How does your business present to buyers?
• When you tell your story, what do they hear?
 Premium / best in class – sustainable OR fixer?
 Is there an identified Growth opportunity
o Why have you not exploited it?
 Strong market share?
o Customer concentration?
o Personal relationships with customers / vendors lost in sale?
 Great Location (for how long)
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18. The Buyer’s Perspective
• How are your Cap Ex needs viewed by buyers?
 Cap Ex required?
o Urgent needs?
o Price reduction equal to cost of deferred maintenance?
o Pro Forma Adjustment to historical EBITDA?
 Business is cash flow positive, so why is there deferred maintenance?
o Typical seller points to opportunities – this is what the buyer hears
o Does failing to “maintain” cause a deeper dive into the financials?
o Are other operations sub-standard or neglected?
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19. The Buyer’s Perspective
• How is your sale preparation viewed by buyers?
 Severance / employment contracts an asset or a liability?
o Locking in employees long term – help for continuity or hinder if buyer wants to
bring in his team?
o Keep key employees through process (Bonus for staying through close) a
benefit for buyer or just a cost to seller?
• Potential liabilities identified and addressed?
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20. The Traditional Sales Process
• The 9 Steps
 Prepare Teaser and Confidential Information Memorandum (NDA signed)
 Market to solicit interest
 Screen interested parties
 Term Sheet or LOI received, negotiated and executed
 Data Room Access & Supplemental Document Request List addressed
 Management meetings
 Definitive Agreement Negotiated & Signed (Step 1 of 2 step closing)
 Regulatory Approvals and Consents received (Step 2 of 2 step closing)
 Post-closing matters (e.g. true up of balance sheet, working capital)
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21. Sale Terms to Consider
• Debt service from operations – paying you with your own money?
 Remedy if payments are missed?
 Poor performance places purchase price at risk?
 Securitized?
• Equity retained with no control
 Watch value decline
 Board Seat
 Right to take over if covenants are breached
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22. Sale Terms to Consider
• Valuation
 % Gross Sales (44%?)
o Does this make sense for the value components of your business?
o IP & PP&E not reflected?
 EBITDA Multiple (5x-9x?)
o Common, but representative of your situation?
o Multiple varies significantly by the opportunity / industry
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23. Letter of Intent
• Key Terms
 Price
 Exclusivity / Stand Still
 Assets Acquired
 Liabilities Assumed
 Remaining Diligence
 Timing
 Contingencies
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24. Lessons Learned
• Sale Process Tips:
 Don’t stop running your business / Operate in ordinary course
o Production or Sales declines will impact price
o Cease advertising and lose the sale – and future cash flow
 Don’t assume the sale will close per LOI / prepare for re-trade
 Must the founder stay through a transition period (key to the business?)
o How Long? Paid? Part Time? Non-Compete?
 Align your interests with the selling team
 $1MM price increase = $50K to broker and $950K to you
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25. Lessons Learned
• Sale Process Tips (con’t):
 Reps and Warranties matter
 Documentation – read it
 Review employee files
 Non-compete – what is reasonable
 Guarantee releases & replacement
 Assume financing?
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26. Lessons Learned
• Sticky Situations
 Post-closing Liabilities
o Holdbacks
o Indemnification
o Walk Away
 Ongoing Litigation
o Who pays costs / receives proceeds / pays damages
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27. About the Faculty
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28. About The Faculty
Norrie Daroga - ndaroga@sfgh.com
Norrie enjoys working with clients to solve complex problems in real estate, business
transactions and licensing of emerging technologies. As an engineer, lawyer, and
entrepreneur, he provides practical, client-focused advice driven by a career as outside and
in-house counsel in the financial services industry.
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29. Ada Nielsen – ada@peregrinemaven.com
Ada C. Nielsen thrives on work, making decisions, and getting things done on time. She is now a
consultant who has commercialized inventions and improves profitability ofexisting products and
services. This is based on her experience successfully launching new products & services, investing in
new strategic ventures, and managing and valuing intangible assets (She creates and uses Intellectual
Property Improv as a way to explain what Trade Secrets are such that people understand what they are
and why they are valuable.)She has monetized off-strategy business ventures, defended BP successfully
in 10 IRS audits, conducted due diligence for various deals, and consulted on acquisitions, new
businesses, and ventures. She wrote the Wall Street presentations and was the lead in creating the
company-wide strategic plan for Chemical Waste Management, then the largest hazardous waste
company in the world. Her core personal assets are common sense, making on-time business decisions,
and working diligently and respectfully to get positive results. Her academic background includes
completing Freshman Chemistry at Cornell (Ithaca, NY) while in high school, earning an B.A. in
Chemistry from Wellesley College and an M.B.A. from the University of Chicago Graduate School of
Business with a concentration in Finance & Marketing. (She learned how to use machining to make tools
while in graduate school at Carnegie-Mellon University. She also built a laser on her own while studying
theoretical physical chemistry as a graduate student at Dartmouth.)
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30. About The Faculty
Bruce Werner – bruce@konaadvisors.com
Bruce Werner is the Managing Director of Kona Advisors LLC, which provides advisory services to
owners and investors of private and family-owned companies. With exceptional experience in finance,
strategy, M&A, governance, and succession planning, Kona Advisors creates practical solutions to the
most challenging corporate problems. Mr. Werner is an experienced Corporate Director, leading
businesses through periods of positive transitions as well as crises. He writes and speaks on boardroom
issues of concern to private and family businesses. He is currently the Chairman of the Director
Development and Referral Program for the Private Director Association. In this capacity, he has national
responsibility for the coaches and students of this director training program. In addition to his advisory
work, Bruce has acted as a principal or consultant to several investment firms, with experience in running
venture, private equity, hedge and real estate funds, as well as futures & options firms. Mr. Werner spent
12 years at Werner Holding Co. in a variety of senior line and staff positions. He held executive
responsibilities in the Climbing Products, Aluminum Extrusion and Insurance businesses. During his
tenure the company grew from $180M to over $500M in revenues.
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31. About The Faculty
Rita Garry – rgarry@rsplaw.com
Rita W. Garry is a seasoned corporate, transactional and data privacy attorney and is the trusted legal
advisor to a wide variety of business enterprises across an array of industries, including professional
services, banking and finance, healthcare, manufacturing, technology, aviation supply, craft breweries, not-
for-profit trade associations and multinational gift card distributor. Rita builds strategic and long-term
relationships with clients to create corporate governance, risk awareness, and legal compliance
infrastructures for her clients to promote their stability, growth, risk mitigation, and future transitional planning
for both strategic and private equity sales, mergers, and acquisitions. Rita’s extensive work with a diverse
client base involves many enterprise matters including choice of entity and governance, employment, finance,
real estate, commercial contracting, software licensing, transactions, and, most recently, data privacy and
cybersecurity compliance. As the importance of data management and privacy laws has grown, Rita guides
enterprise clients, both internationally and nationally, in designing and operationalizing data management and
protection law compliance programs, including those related to GLBA, HIPPA, GDPR and CCPA, among
others. Also, since business data is frequently stored, processed, and shared with customers, vendors and
other service providers, Rita works with clients to manage data protection in their contractual arrangement to
help manage privacy law compliance.
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32. Questions or Comments?
If you have any questions about this webinar that you did not get to ask during the live
premiere, or if you are watching this webinar On Demand, please do not hesitate to email us
at info@financialpoise.com with any questions or comments you may have. Please include
the name of the webinar in your email and we will do our best to provide a timely response.
IMPORTANT NOTE: The material in this presentation is for general educational purposes
only. It has been prepared primarily for attorneys and accountants for use in the pursuit of
their continuing legal education and continuing professional education.
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33. About Financial Poise
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