Preparing a Business for an Acquisition Review

If you are considering presenting your business to a potential acquirer, preparation can make a significant difference in how the process unfolds. A well-prepared seller is more likely to attract serious interest, facilitate an efficient review process, and support a smooth transaction.

Financial documentation is typically the starting point for any acquisition review. Having clean, organized and clearly presented financial statements for at least the past three years is important. If your financial records are not in order, working with an accountant to organize and normalize them before approaching potential buyers is advisable.

Understanding and being able to explain your financial performance — including any unusual items, one-time events or adjustments — is important. Buyers will want to understand the underlying, normalized economics of your business, and being able to explain the numbers clearly builds confidence.

Operational documentation — including key contracts, customer agreements, supplier relationships, employee information and operational processes — should be organized and accessible. Knowing where your key documents are and being able to produce them promptly demonstrates professionalism and facilitates due diligence.

Understanding your customer base — its composition, concentration, retention characteristics and growth dynamics — is important information that buyers will want to understand. If a significant portion of revenue is concentrated in a small number of customers, be prepared to address the risks and mitigants associated with that concentration.

Legal matters — including any pending or threatened litigation, regulatory issues, intellectual property status and material contract terms — should be reviewed and understood before engaging with potential buyers. Surprises in legal due diligence can derail or complicate transactions.

Having a clear and honest understanding of the risks and challenges facing your business is important. Buyers will conduct their own due diligence and will generally discover significant issues. Being forthcoming about challenges and how they are being addressed builds trust and facilitates more productive discussions.

Understanding your objectives — what you want from a transaction, including price, timing, transition arrangements, employee treatment and other considerations — will help you evaluate whether a particular buyer or transaction structure is right for you.

Engaging experienced advisors — including a transaction attorney and, where appropriate, an accountant or financial advisor familiar with business transactions — can be valuable in preparing for and navigating the acquisition process.

This article is for general educational purposes only and does not constitute individualized legal, financial, tax or business advice. Parties considering a business transaction should consult qualified professional advisors.