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Creating a Crisis-Free Exit Strategy

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Middle market mergers and acquisitions remain prominent in the business community. Buyouts in North America increased 34% to more than $214 billion.  Bain Capital reported that capital for buyout and acquisitions hit a global record of $1.2 trillion in 2014.  A survey by Citizens Bank revealed that two-thirds of mid-market business leaders anticipate that the next 12 months will see an increase in their company’s market valuation.   The available capital and rise in business values bodes well for business owners planning to sell.  Buyers may be willing to pay increasing multiples of earnings for the first time since the financial crisis of 2009. Owners of middle market businesses who are preparing an exit strategy should do a thorough review of their corporate records and business operations when getting a business ready for sale.  Buyers want a business where they are confident in the long-term success of the business.  Business consulting services can be utilized to ensure that your records and business systems are ready for a sale. Doing so will make selling and/or exiting your business seamless.  Business valuation services should also be utilized to determine the current financial state of your business rather than attempting to determine the value on your own.

This is even more urgent if you are planning to exit your company within the next few years. There have been many cases where business transactions are devalued due to poor business systems. Today’s buyers want a business that does not require a re-organization.  Companies which are poorly organized will more than likely take longer to sell.  Time is money for buyers – make sure your company is ready for a transfer of ownership.

Avoid the following scenarios to ensure a crisis-free exit, if you’re deciding to sell.

Minute Books Aren’t Current

Empty or spotty minute books can delay the acquisition of your organization. It is required by law for corporations to hold annual meetings with directors and shareholders. The minutes of corporate meetings must be recorded, as well as any changes in bylaws. This needs to be updated before a buyer looks at your records. You can utilize business consulting services to assess your organization for these discrepancies.

Authorizations Aren’t Accurate or Current

It’s imperative to document who is authorized to make commitments on part of the business, and at what level. This is a useful tool for risk management. Buyers want to know the functional nature of the business organization.

There Are Missing Stock Certificates and Stock Ledgers Are Out-Dated

This is highly important because it details who owns the business. It’s common for stock certificates to become lost, especially when they aren’t maintained in a minute book, within a central location. The paper trail will have to be reestablished if the owner no longer has the originals. This includes signing lost-certificate affidavits and recreating stock certificates.

Insurance Isn’t Updated

Insurance policies should not be allowed to lapse, but it sometimes happens. It’s important to review your policies to ensure they aren’t outdated. As your company grows, it becomes more complex, which calls for a policy with comprehensive coverage. The most overlooked policies include directors-and-officers and general liability. Business consulting services can be employed to assess your current insurance coverage to determine its adequacy.

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