The specific information that will be required by a business broker or intermediary to prepare your business for sale depends upon the industry in which your business operates. However, certain information will be necessary and beneficial regardless of industry:
o Three to Five Years Historical Financial Statements / Tax Returns – Although a business buyer will be paying you for what the business is set to accomplish going forward (as of the date of sale), they will look to your historical financial statements (and tax returns) to assess the risk of your anticipated earnings stream.
o Interim Financial Statements for the last Three Fiscal Periods – Very few business transactions will close at the end of a company’s fiscal year. As a result, interim financial statements will be required by a buyer, and your broker / intermediary to fill the void between the company’s most recent fiscal year end statements and the current date / date of sale.
o List of Assets Included and Excluded in the Sale – Your broker / intermediary will need to demonstrate to a buyer exactly what they are getting in return for their investment. Having a prepared list of both tangible and intangible assets included and excluded from the transaction not only helps clearly present to a buyer what they are getting but also helps eliminate any discrepancies at closing.
o Schedule of Indebtedness of the Business – Whether the proposed transaction is an asset sale or a stock sale will determine the relevancy of this information. If only the assets are being purchased by the acquirer, the existing debt obligations will remain the responsibility of the seller and be of interest to the acquirer only to make certain that all claims to the assets are removed at closing. However, if the buyer is purchasing an equity stake in the company, they will need to understand the company’s full financial picture in order to make a buying decision.
o Prior Appraisal and Valuation Reports – Although a current valuation or appraisal may be one of the services offered by your broker / intermediary, providing previously completed valuation reports will help your representatives and buyers understand how your business has changed and grown over time.
o Business Plans and Projections – Although a buyer will look to the historical financial statements for an understanding of risk, price will be determined based on what the business is set up to achieve going forward as of the date of sale. Nobody has a better understanding of this than you, the seller. The best way to demonstrate your future expectations is to prepare a business plan that includes financial projections.
o Marketing Materials – Nobody knows your business and its products or services better than you do. Chances are you’ve been selling the benefits of your products and services to customers for years. There’s no need for your representatives to recreate the wheel. The benefits of your products and services to your customers are the same ones your broker / intermediary will need to sell to a prospective purchaser.
o Economic and Industry Data – Although your broker / intermediary will do their own economic and industry research, there may be information available to you as an industry insider that is not readily available through external sources. Providing this information to your broker / intermediary will help them cast your business in the best possible light when working with buyers.
o Copy of any company lease obligations – Similar to the schedules of indebtedness, these are most relevant when assumed by a buyer. However, even in an asset sale buyers will want to know that no third party claims exist to the purchased assets.
o Organizational Chart – There is a difference between ownership and management. Although the sale of your business will result in a change of ownership, most buyers will not want to see a change in management. The skills and expertise of your workforce and management are one of the things attracting the buyer to your business. An organizational chart will provide a new owner with a clear picture of identified roles and responsibilities.
o Copies and Descriptions of Patents, Trademarks, Trade Names, Existing Research and Development and Other Intellectual Property – Although the majority of this information will not be fully disclosed or revealed until the due diligence phase, having this information prepared in advance will allow for a more timely process and help to attract a diverse group of buyers.
o Stockholder Agreements – Similar to the schedule of indebtedness and lease obligations, stockholder agreements are most important to a buyer considering an ownership stake in the existing company. However, even a buyer purchasing the assets will want to know that no outside entities have a claim to these assets.
o List of Competitors – Providing a list of competitors to your broker / intermediary will not only help insure that the proper precautions are taken to maintain confidentiality but, it may also provide a starting point for uncovering potential acquirers.
Not all of this information may be readily available or necessary to complete your transaction. However, the more information that you can provide your broker / intermediary about your business the better job they can do in marketing your business. The result of your hard work will be more buyers brought to the table by your broker / intermediary, all competing for your business.
