Name: Live Webinar: Selling the Business
Uploaded: 2025-11-20T19:46:05.453Z
Duration: 1 h 31 min 24 s
Description: Live Webinar: Selling the Business

Transcript for "Live Webinar: Selling the Business": Good afternoon, and welcome to the third session of our private business owner succession webinar series, selling the business, hosted by PKF O'Connor Davies. Before we get started, I'd like to go over a few housekeeping items so you know how to participate in today's call. We're pleased to offer live live closed captioning throughout the webinar. To access the captions, please use the stream text link located in the chat section of your attendee panel. You'll have the opportunity to submit text questions to today's presenters by clicking on the q and a tab on the right hand panel. You may send your questions at any time during the webcast. We have a lot of material to cover, and if time permits, we will make an effort to respond. If we cannot get to your questions, a response will be sent post event. This webinar is offering 1.5 CPE credits in specialized knowledge. Polling questions will be launched in the polls tab on your right hand panel, and they will be closed after each question after a short amount of time. You will need to respond to five of the polling questions to receive full credit. CP certificates will be issued within eight to ten days via email. A copy of the PowerPoint slides and a recording of today's webinar will be made available to you via email four business days post event. As we near the end of the webinar, we do have a short survey which will be prompted, and your responses are greatly appreciated. At this time, I would like to introduce our speakers and pass the floor to Cynthia Adam Harris Harrison, managing director with PKF O'Connor Davies Center for Private Business Owners. Cindy, and our speakers. Good afternoon, everyone. Thank you so much for attending. We're happy to have you here, and we're very proud to welcome you to our second annual Center for Private Business Owners Succession Academy. We hope that you will walk away from the academy with an understanding of the succession planning process and how important it is to be proactive as you begin your planning. And depending on your particular situation, that the implementation of your plan can take a number of years. The process requires a multidisciplinary team of expert advisors who will are intertwined to make sure that they help and develop your implementation and your plan. Your personal and your business needs are very much intertwined in this process, and both areas may impact the decisions you make. You must also remember that this can be an emotional time for everyone, the owners as well as families and those key leadership, experts that are with you in your company. So we wanna make sure that we support you through all aspects of transition, potential issues and challenges that you may face when you are developing and implementing your plan. The academy and the three webinars are organized around three options that most clients and business owners have, an intra family transition, which we aired in our webinar on October 8, the employee partner transitions in the ESOP value proposition, which was aired on October 30, And today, we are thrilled to have with us the sale of the business and these extraordinary professionals who I am so happy to introduce to you right now. Bob Murphy is a partner, and he is with our PAPFK Investment Banking Group. Alberto Sanesi, who's also a director here with PKF Investment Banking. We welcome Amy O'Keefe, who's partner with Nixon Peabody LLP, and Chris Migliaccio, who is JD Partner and Tax Structuring and Transaction Advisory Services for PKF O'Connor Davies. We are so honored that you have all agreed to be here with us today, and I can't wait to hear this presentation. Every time I hear anything that comes from PKF investment banking and any of our professionals, I'm thrilled because I always learn something new. So no further ado, Bob, so happy that you're here with your team, and I will turn it over to you now. And thank you so much for being here, everybody. Thank you, Cindy. Thank you, Cindy. Welcome, everybody. Yeah. Investment Banking is an investment banking firm focused on m and a advisory services and mainly focused on privately owned, family owned companies in a variety of different sectors across, North America. The team, collectively in our careers, have closed over well over 300 transactions. Myself, I have thirty years of investment banking experience. Prior to that, I was a senior corporate development officer at a public company, and I started my career as a CPA with one of the major firms. Maybe I just ask everybody to do just a a little brief intro, and then we'll kick it off. Alberto? Yeah. Absolutely. Thank you. Thank you, Bob. And, thank you everyone for taking the time to, attend our webinar today. My name is Alberto Sinesi. I'm a director with, PKF Investment Banking. I'm physically located in Stanford, Connecticut. I split my time between Stanford and New York City. I've been in the M and A advisory world really since, 2010, both in, in Europe and and North America. I worked on, close to 50 M and A transactions for private equity firms, publicly listed companies, family owned, companies. And, yeah, I'm very passionate about what I do. And, once again, I look forward to these discussions, and thank you again for attending our webinar here. Thanks, Amy? Alberto. Sure. Amy? Yeah. Hi, all. Thank you so much to my friends at PKF O'Connor Davies for the invitation to join you today. I'm thrilled to be here. By way of introduction, I'm Amy O'Keefe. I'm a partner in the m and a private equity and family office practice group at the law firm of Nixon Peabody. Nixon is a great place, and I celebrated my twenty year anniversary with the firm last month, so I'm a lifer. For those who may not be familiar with Nixon Peabody, we're one of the country's 100 largest law firms. We've got about 700 attorneys and 15 offices across The US, Europe, and Asia. We are a full service law firm, and we can cover pretty much any legal need that anyone may have, be it litigation, real estate development, regulatory issues, tax, estate planning, etcetera, etcetera. But, of course, the very best practice is obviously mergers and acquisitions where I sit and spend my time. So in my practice, I do m and a deals all day long on both the sell side and the buy side, and I work with both strategic and financial transactions. So I get to spend a great deal of my time working with all of you, with entrepreneurs, owner operators, and family owned businesses that are going through their first sell side transaction. And I just have to say that this is by far my favorite kind of work, and I love building relationships with owners and families and learning all about the business that they've nurtured for years. And I love partnering with people like you to, you know, guide those folks through an exit event that's gonna create and protect lasting generational wealth for families. So thank you, PKF O'Connor Davies, for having me. Thank you, Amy. Great to have you. Chris? Chris Magliaccio, tax partner at at PKF O'Connor Davies. Work regularly, with Bob and Alberto on transactions. Much like Amy, I work on both the sell and the buy side, and and also agree with her. I love we love the the work on the sell side the most. I think one of the advantages sometimes of working on on both sides is that, you know, we can bring some of that perspective of what the buyer is thinking and how they're approaching it to sellers who, you know, this is maybe the only time they're gonna be selling a business. Right? And so a lot of what we try to bring is helping understand, you know, what are the things that are important, you know, and especially with tax. Right? Tax can get fairly complicated, but it's about understanding kind of as much as you need to. Right? Sometimes tax is very important in transaction. Sometimes it's less so. So we'll go through all of that and, talk about, some of those key issues. Back to you, Bob. Alright. Alright. Thank you, Chris. So, these are the topics for today that we're gonna cover. It'll probably take about sixty minutes or so to cover this and then have time left for q and a, so encourage everybody to, in the q q and a, tab there to go ahead and submit questions as as we go, and we'll get to as many as we can at the end. But, we're gonna first talk about exit timing. Right? How to evaluate the right exit timing. And then some of the main points in preparing a company for the optimal sale. Again, that could easily be a forty five, sixty minute conversation in and of itself, but we'll touch upon some of the key things. And then we'll really walk you through a typical m and a process, talk about some of the common pitfalls to avoid. At a high level, we'll talk about deal structure and get into valuation and and talk about how buyers actually come up with the value that they're willing to pay. We'll cover some tax considerations in structuring the deal and selling a company. Again, won't make anybody an expert today, but but cover some of the high points and then have some time for our q and a. And and I thought what we do that's not on the script here before we kinda kick into this agenda is just give a quick little overview of the m and a market this year. Right? So we came into this 2025 year, and the overall market sentiment was very positive that this would be a very strong m and a year. And the first quarter, had good strong activity with about 4,700 transactions. And then Liberation Day came. And and the market sentiment almost changed overnight with a much higher level of uncertainty, a real lack of visibility, you know, into kinda what the future operating results could be. Right? And and, again, that was driven by increased tariffs and an ever changing trade policy from the administration, which then creates a higher concern about inflation, recession, and clearly the timing of interest rate cuts, which we all came into this year expecting the those cuts. And so the activity in the second quarter did dip down from the first quarter, but but really not significantly. And then later in June, you know, by the June, a lot of these concerns had had dissipated. Right? The stock market that took a beating there in the second quarter had rebounded. And overall overall sentiment came back to to being very positive and really a less risk, adverse environment. And so q three picked back up. Q three was was a strong quarter here. We expect the fourth quarter to be strong, and we expect overall here in North America that the m and a volume from, from the number of transactions closed will be up about five to six percentage points over 2024, probably somewhere around 18,000 to 19,000 transactions. And and where we sit today, we've got some real great positive drivers. You know, approximately 1,000,000,000,000 of cash sitting with private equity and financial buyers for buyouts and add ons, 3 and a half trillion of cash sitting on nonbank, balance sheets, corporations, about 12,000,000 businesses owned by baby boomers, and still, you know, looking for a couple more, rate reductions here over the next six months. So just kind of a little overview of of the market for this year and and and where we are today. And and looking at 2026, you know, providing we don't get into a recession, providing that the whole tariff situation kinda remains kinda stable, and we get a couple more rate cuts. I mean, I think in general, the m and a community feels that, you know, 2026 will be will be very busy. So we'll we'll kinda kick off here with timing. So, you know, this is a conversation that, you know, all m and a professionals and other professionals constantly have with with business owners. You know, is this the right time, you know, to to sell my company? And, you know, in many cases, it it's it's a very definite go, no go decision. But there are also many cases where it's not as clear, and it takes a lot of judgment, a lot of experience, a lot of knowledge about the market to really get to that right decision. And and these conversations really center around three main areas of personal factors, business factors, and and outside factors like the economy and the m and a market. And so it's a combination of those three buckets that then kinda really determine, yeah, now's a good time or perhaps no, maybe you should wait. And so those personal factors really come down to where is the business owner or business owners in in their life. What why are you looking at a transaction? Is it a matter that you're just ready to retire and move on and have more time for family? Is there another business you wanna start? Do you feel like you've taken the company as far as you can take it? So what's driving it? And then the middle bucket is how's the business performing? Are you having a good year? What's your outlook like? Have you recently launched a new product or service? And therefore, perhaps you should wait until until you get more traction. Do you have a major contract coming up for renewal? So looking at all those business factors. And then the last bucket, it it's not even so much about how's the m and a market doing. It's really how's the m and a market doing in your sector. Right? Certain sectors can can be struggling while other sectors are very active. Okay? So what's going on in your sector with the buyers with the valuation? And so you look at all those things to come down to, you know, what timing makes sense. And and may and making that decision, you know, I feel strongly that every business owner should understand why they're pursuing the sale and and what they're looking to get out of it. Is it just purely the best value? Are you very concerned about the culture fit for employees and customers? Are you looking for, you know, a majority sale, but to make sure there's money invested into the company? So, you know, what are you trying to achieve? And and you should also understand what you plan on doing post transaction. Yeah. So One thing I'll note there, Bob, is that, you know, that you have a point in the slide about, you know, what do you need to retire, particularly if you're in that position, which I think. I'll I'll just drive home there that the tax can be an important piece of that. Right? Because the headline price, you're obviously gonna have to pay tax on that to to one extent or another. And really understanding that can be very important. You know, we had a client where the original offer price when we actually ran the numbers is really right at the line of what they were able to accept from a retirement perspective. And so we had, you know, difficult discussions because the buyer was trying to negotiate purchase price, and they're like, well, if they come down too far, we've actually we've now dropped below our line. And so it. was really tenuous. And that's when we're you know, to toot Bob's horn. But Bob was able then to come in and and when he was representing them, sort of get a a higher purchase price, which should have made everything a lot smoother because at that point, they were then able to, they were, you know, well above what their target was. And they could clearly see that because we had done the tax analysis that okay. You know, individual dollars are less important because we're well above what we need to make sure that we can retire. Sure. Yeah. Okay. Thank you, Chris. So this next slide again, I mean, I mean, I could ask Amy to talk about getting prepared, and she could probably spend an hour. Alberto, Chris, all of us could spend a long time, and we don't have that much time here. So kinda just the nuts and bolts, kinda quickly here of getting the house in order. You know, Alberto, may maybe you could kinda cover this, and then maybe, Amy, you could talk a bit about legal and documentation. Yeah. Absolutely. Absolutely, Bob. Thank you. Yeah. To your point, Bob, there's really three key areas that we typically see as being critical when it comes to preparing a business for a nominee transaction. I'll cover the first two, which which are financial and operational respectively. Right? So going back to financial, number one, it's absolutely important that the sellers are able to provide accurate historical financial information on an accrual basis. That's the expectation on the buyer side. The time frame for financial has to be at least three years. Alright? That's pretty much customary in any m and a process. Point two, equally important, the ability to generate and deliver monthly financial statements on a monthly basis. Alright? As the m and a process unfolds, the expectation is that the buyer will continue to track performance. And so as a result of that, it is absolutely critical that as a seller, you're able to provide monthly financial statements. And then a few couple of additional items here, get receivables in order, of course. And then point four here on the page is paint the picture for the buyer. Right? In other words, being able to articulate your forecast for at least two years. Right? A budget and possibly an extra year projected performance. Then lastly, once again, as bankers, we always talk about adjusted EBITDA, right, which for us means the truthful earnings profile of the business. So once again, in order to achieve that number, you should be able to have support documentation for anything that is non operational in nature slash, one time, in nature. Alright? That's on the financial side. And then very quickly on the operational side, I'll really point to the second bullet under operational, which is really being able to track what we call KPIs, so key performance indicators. What are KPIs? Are business metrics that are relevant for your particular company that shows the business model, the revenue model, margin profile, manufacturing capacity, you name it. And then lastly, again, within operational, making sure that the company is compliant with specific industry regulations. Could be a phase one or phase two on the environmental side, EPA regulations, and the like. So, again, it's about being being prepared and have the right procedures and protocols in place. K. Thanks, Alberto. And and and I think, you know, two of the the most common things we run across that sometimes will then take us longer to get a company ready to go is is, again, that accurate financial reporting and and being able to go in and calculate some of this business metrics from the data that the company has but hasn't actually tracked in the past. So thank you. Amy? Yeah. So I I could, I thought, as you said, I could do an hour. I could. do three hours on this. I promise. I won't. But I I think it's really important, so I'm gonna take three minutes. It's. it's really. critical to get your company's legal ducks in order in a row before you hit the market. And because of that, we often work with sellers for twelve months or even more before a sale process even kicks off to help them to prepare and get ready. And when we're going through that legal preparation exercise, we're always trying to look at the company sort of through the lens that a potential buyer will be evaluating the legal characteristics of that business. And, you know, we found over time that one of the very best things that a seller can do in order to maximize value is to really diligently prepare for the extensive legal deep dive that all buyers are gonna put that company through. So and we call that due diligence. Buyers do due diligence on the legal aspects of the business that they're targeting, and they turn over every rock, and they look at everything from a legal perspective. And from a seller's perspective, the goal of that due diligence exercise shouldn't just be to kind of check the box and get through it and give the buyer all of the information that it's gonna wanna see, but it's really equally important to make sure that the diligence process is easy and seamless for the buyer. Because doing that and making it easy and seamless from the buyer's perspective really subtly reinforces to a buyer that the company has it shipped together. That's the technical legal term that I learned in law school, but it's super important from a buyer's perspective. Like, that's what a buyer wants to see. It wants to see that the target company and its operations and its systems are worthy of a premium valuation. So the slide on the screen gives, I think, really good examples of the types of preparatory work that we would do with many of our sell side clients prior to a sale, but I'm gonna quickly offer just a couple of concrete examples of the types of things that we try to do when we work with sell side clients on this exercise. And just to be clear, I'm not speaking about any one specific client experience that I've had. Like, we see these types of issues pop up frequently, and it is nothing to be embarrassed about. You know, sellers are busy running and growing their businesses, so this stuff is naturally not always top of mind. But these are the sort of things that if left unaddressed can cause deal friction or possibly a deflated valuation, and, obviously, that's not a result that anyone wants. So just by way of example, when preparing a company for sale, from a legal perspective, one of the things we wanna do is make sure that all of our sell side clients can locate and have complete copies of all of their important documents. Right? Because it's it's a bad look if a buyer asks for copies of a company's contracts with its top 20 customers, and the company can only locate written agreements for 10 of those. And the ones that it can locate are missing exhibits and signatures and all sorts of things. So when we know that this is a question the buyer is gonna ask and they all ask for written contracts with key customers, we really encourage our sell side clients to locate those things ahead of time. Or if they can't, we work with them to help to put written agreements in place. And this keeps due diligence moving quickly once it starts, and it leaves buyers with a much better impression than they would have had if the seller needed three weeks to gather and provide its contracts with its top 20 customers. And one other issue that we frequently see is around valid IP assignments from employees and contractors. You know, buyers will ask for IP assignments not just from current employees and contractors, but often former current or former employees and contractors too. And, you know, particularly if the target company is really IP heavy like a software business, buyers can get really spooked if those aren't in place. So instead of waiting for the buyer to make the due diligence request, and then the company looks in its records and realizes that it doesn't have good IP assignments and then has to scramble or come up with a good reason why, we make sure ahead of time to ask this question so that the company has a runway to put a process in place to collect any missing IP assignments before a buyer starts poking around. And maybe the last thing I'll highlight is that, honestly, nearly every single closely held business that I've ever worked with has had some degree of holes in its corporate and its stock ownership records, and that's an issue that can almost always be addressed. It can be addressed with written legal documents, but it's so important to do it before a buyer begins diligence because the last thing that a seller wants is for a buyer to say, gee, the stock records that you've provided to us in the data room don't tie up with the ownership of the company that you've told us about all along. That's not a good thing. So, obviously, what I'm just the exercise that I'm describing is not a fun one to deal with as a seller. Right? It's just more on your to do list on top of running a complex business. But I really do think that it's a very important step to best position yourself as credible and organized and really worthy of the high multiple that you're seeking. Right. Yeah. Thanks, Amy. I mean, again, we could spend a lot of time here, but I I think that hits the highlights. And this next slide, after now we just kinda talked about some of the basic blocking and tackling. We kinda just picked six areas that are really key things to have in place before entering a sales process that really help drive up your value, but also drive up the certainty to close. And again, we'll we'll try to kinda hit these briefly. Then maybe, Chris, we could start with you hitting, talking about a topic, and and we'll move it around. Sure. Sure. So I'll talk a little bit about deal structure. That can be, you know, particularly important from a tax perspective. And this is where a lot of the the language, in initial conversations around transactions can get a bit confusing. Right? A buyer or a letter of intent might say that the intent is for this to be a stock acquisition. That might mean only from a legal perspective that the goal is from a tax perspective for the buyer to acquire the assets. Reason they want that is it tends to be better for the buyers from their tax perspective. They're able to take deductions on the purchase price over time. But that can be a very difficult thing. We're we're going back and forth between how is something gonna be treated from a legal perspective, how is something gonna be treated from a tax perspective. As a seller, it can be really important early on in the process to understand, at least at a high level, what are the likely transaction structures that a buyer is going to propose, And how do they impact you from a sales perspective? Is this something where if the buyer is, you know, proposing something that's advantageous for them, that there's a real negative to you versus scenarios where maybe it's not that negative to you and you're able to tell the people negotiating on your behalf. Actually, tax isn't an important issue here, so you're able to give the buyer what they want on that and then maybe argue for something else on the other side. So it's a lot of especially early on, just sort of understanding things at a high level. You know, they're basic things. And again, I could take a while to to talk about all the various versions. But one simple one is an idea that if I have an owner who's in Florida in a business that's in New York, I'm gonna have a different tax impact if the owner sells their stock versus the assets of the business are purchased. That might be a very important thing in a transaction. Or I might have a scenario where everything is in the same place and there's no assets that are driving a a difference between ordinary incoming capital gains. So, again, all of those things early on important to think about, for these for this process. Thanks, Chris. Alberta, you wanna talk a little about kinda growth plans and articulating growth plans? Yeah. For sure. This is my favorite topic by far, Bob, and I. briefly touched upon that before. But, one of the aspects that we typically work on substantially with, with business owners is really the ability to articulate future growth plans of the business. Once again, a potential acquirer purchases the present of the company or more so the future of the company. Right? And so what's absolutely paramount here is being able to articulate what the growth avenues for the business are. And when I say growth opportunities or growth avenues, I really mean new r and d capabilities or a new IP, new patents, a, new customer contracts that will be signed up in short order, geographic expansion. Right? It could be a new product and or service lines or an expansion of existing manufacturing capacity. Everything that paints the vision for a potential buyer is critical in making sure that the business is positioned well during the m and a process and also really paves the way for maximization of purchase price. Needless to say, revenue and earnings growth are two of the key elements which will affect the valuation multiple. Right? So, that's where we really work a lot with our clients in crafting that that vision. Right? So these are just my thoughts here, Bob, at the high level. Yeah. Yeah. No. For sure. I mean, again, growth is both you know, the growth you've recently had and future growth definitely has a a pretty big impact on onto the valuation. So thanks there. Amy, you wanna cover a topic or two? Yeah. I'm happy to. Why don't if it's okay with you, Bob, I'll talk a little bit about, the internal team that sellers should be building within their organization and then the corresponding team of external advisors that help to get the transaction done. Okay. So taking an internal team first. Building a strong internal team is super important. And if sellers here only remember one thing that I say today, you know, let it be that you you simply cannot do it all by yourself. You really can't. Like, the the getting your legal house in order process that I described on the last slide, it truly takes an incredible amount of time and resources as will the due diligence exercise that the buyer is gonna put you through. So I've seen many, many people try, but it is just really challenging to run a business during the day and then prepare for a sale alone in your office at night. It just it's really tough. So identifying, I think, a few really confident, organized, and highly trustworthy team members that you can bring into the process at the right time can really save your sanity, and it nearly always leads to better results. So we find that our clients often bring in at least the CFO and often the head of HR because so much of the diligence process that a buyer is gonna do is gonna be focused on financial information and human resources matters. But, of course, it varies organization to organization about what makes the most sense. And as I say this, I recognize that there's often concerns about bringing other people in your organization under the tent because it's natural that you would worry about the the confidentiality of the sale process, and you might also worry about those people running for the hills and going to look for other jobs if you tell them that the company is gonna be sold. But I just there's absolutely ways to deal with and mitigate those risks. You know, we would always recommend a strong confidentiality agreement before you do bring another team member under the tent. And many of our seller clients also decide to give meaningful sale bonus payments to the executives that are gonna be helping with the diligence process and helping to achieve a successful sale. But the key there is that the bonus payment doesn't get made unless confidentiality is respected and until a deal actually closes. So the executives have to stick around and see the transaction through to the end if they wanna get paid. So that's kind of the internal team piece. And I think equally important is building the right team of external advisors to support you through a sale process. And, you know, it's true of my family with young children. It's also true of every m and a sale process. It takes a village to get it done. So there's a lot of team members that you should at least be considering. It's not just an investment banker. It's not just an m and a attorney. You wanna think about a strong accountant. You wanna think about a strong tax adviser, you know, who may or may not be the same as the accountant, a trust and estates adviser, and likely a wealth manager to help you to determine how to manage the deal proceeds post sale. And I think that as you're building that team, you wanna look for a couple of things. So, of course, extreme expertise. You want advisors who understand your industry deeply and who also understand the nuts and bolts of an m and a transaction. I Think we might talk about this a little bit later too, but please do not let the real estate attorney that you are best friends with in the third grade sell your company. It often doesn't work well. You want outside advisors who are goal oriented and who are practical. So you wanna look for people who are gonna invest the time and the energy to get to know you and your goals really well, and then who are going to have those goals dictate their approach to the deal. So there are advisors out there who just wanna do things their own way and who, at least in the legal realm, you know, they're intent on winning every single point, but that's not the advisor that you want or that you need. You need advisors that are gonna be commercial and constructive, and as Chris said, who are gonna fight for the issues that you care about and leave alone the issues that you don't. You want people who are gonna be collaborative and who are gonna play well in the sandbox. And then I think the last thing that I would suggest you look for really is personality and a fit with respect to values. And I say this because you are going to be spending far more time with this group of external advisors than you probably anticipate. And you really wanna pick people who share your values, share share your sense of humor, and have the same sort of commercial approach that you would want, reflecting you in the market. So I usually describe it to people, you know, as if if we're gonna be stuck in a conference room together for five hours, would we leave that room having spent a decent amount of that time smiling and laughing and encouraging one another? Like, if so, that's a great fit. If we're gonna leave miserable, not a great fit. So you've gotta choose your external team wisely. Thanks, Amy. Thanks, everybody. It's, great stuff. These last two points, over here on the top left, pinpoint value enhancement elements. Really, what we're talking about there is, in a very compelling way, presenting all the great aspects about your company that make it both attractive and valuable. Right? So whether that's low customer turnover, whether that is is high high profit margins, it's the IP you have, it's it's the depth of your organization, It's the infrastructure you've put in place, the IP, whatever it is, presenting all those great aspects in a compelling way. And then the last item here at the bottom left, addressing risk factors. Again, you've done if if you've done your right preparation, you've identified perhaps some legal documentation that needs to be taken care of. Perhaps it's been identified that you're not properly reporting sales tax or income tax reporting in in the in every proper state, things that can get fixed. But, also, being prepared to address items that will be a concern to a buyer that aren't items to be fixed. And so a good example would be customer concentration. You know, you've got a customer that's 45% of the business. Okay? So being prepared to explain the buyers why they shouldn't be concerned. Because I've had this customer for fifteen years. They've re reviewed, you know, three year contracts, you know, the last five times. We're so important to the business. We've got relationships throughout all the divisions. Whatever it is that a buyer may be concerned with building your case ahead of time. Right? So, again, those are just taking six things in addition to the basic blocking and tackling to help drive up the value and also increase that certainty to close. So next slide here. I'll walk through this. Just take a minute or two. And and this is really looking at an m and a process, a cell site process from beginning to end at a kinda high level. And on the next slide, we'll break this down to four different phases with some more detail. But, again, it starts with a business review, meaning understanding everything about the business. Moving on with that to be able to address those any identified issues. Making sure we're identifying all the great things about the business and the opportunities. And then figuring out how to best position this company in the marketplace to attract the right buyers. Right? And then developing marketing materials, you know, commonly referred to as a SIM or a confidential information memorandum could be a forty, fifty page presentation deck. A financial model that not only covers historical, but it's gonna cover at least the current year and the next year projections and sometimes three to five years worth of projections. Doing all the buyer research. Who we going to? Who should we go to? Should we be going to foreign buyers? You know, what's strategic? So our financial buyers? Putting that list together. And then number six here is actually contacting those buyers, speaking with them, signing disclosure agreements, sending them information, having them submit a bid or what we call an indication of interest, which could be a one or a two page document that, hey. Here's the value we're looking to pay. Here's why we were interested. Here's how we'd finance the deal. You know, just some high level points. And then moving on to selecting some of those parties to actually meet with, okay, and share more information and then eventually get a letter of intent, which is a six or seven page document with a lot more detail, about the deal. And and we'll cover a letter of intent in in in ten or fifteen minutes from now. And then, again, during that process, right, there's a lot of advice that goes into the structuring of it, the value, the terms, looking at the quality of the buyer, the certainty to close, and then eventually selecting one party, selecting a closing date with some timelines and milestones, and then getting into all the legal documentation and all the confirmatory due diligence to get to a closing. So, again, high level just going from beginning to end. And this next slide now kinda just breaks it down. And, again, we we could spend thirty, forty five minutes on this slide alone, which we don't have the time. But just taking what we what I just covered and breaking it down to four phases. Alberto, you wanna cover this for us? Yeah. Absolutely. Absolutely, Bob. To your point, these are the different, phases of a of a typical cell site m and a process. Right? There's different permutations depending on the the specific circumstances, but this breakdown should give, the folks on the line here a good picture of how a cell site M and A process looks like. Alright? From a timeline standpoint, on average, a cell site M and A process takes about six months from the beginning to closing. We have been on deals that took less than that and then deals that, definitely took longer than that. Again, it's situation specific. Alright? But going back to the first phase, alright, is the preparation phase. In my view, the preparation phase is the most critical piece of the puzzle here. Right? So we talked about assembling the team, Amy talked about it, internal team as well as the team of advisors. We talked about the business review, which is really about understanding the business and also understanding the financial performance and the underlying accounting. A very important concept here within the preparation phase is the recast of financial performance. What we mean by that is having a look at financial performance from a quality of earning standpoint, which means trying to understand whether there are any items in the, profit and loss and the balance sheet that should be adjusted for. Could be, personal expenses, could be a ramp up of a of a new plant, right, that is not running at full capacity. Right? Anything that doesn't portray the real and truthful earnings profile of the business. Alright? We wanna look into that. Bob talked about, on the prior page, about the marketing materials. Alright? So we as investment banker bankers work really closely with our clients when it comes to drafting two documents in particular. One is what we call the teaser and the other one is the SIM that stands for confidential information in more end. Now the teaser is a one page document that describes the company at the high level, the investment considerations as well as the growth opportunities and is redacted. That means that there is no name that is being brought up that ties to the company. It's a bit of an art to put that together. Then the SIEM is a much more comprehensive presentation about the business as Bob talked about before. During this preparation phase, what's also key is really identifying all the really most viable, buyers that could have an interest on on the seller's company. Right? And sometimes you may be surprised there's, a good number of names that are operating in the same industry wherein the, the seller operates, but that the seller doesn't necessarily know. Alright? So it's about making sure that we are prepared to identify, all possible viable acquirers. And then at the same time, populate the data room. Right? We can't wait until we're in the market and talking to buyers to start populating a data room. Right? It's that process needs to start now. And then obviously, right, mitigating key issues. Right? The preparation phase can take between sixty and a hundred and eighty days. We have worked on deals. We're able to start having conversations with acquirers within sixty days, and then other circumstances where it took us several months, right, to we said or we phrase it hit the market. Alright? But once all of this has been covered, then the second phase or the marketing phase starts. What we mean by marketing phase is the phase wherein we, as investment bankers, on behalf of our client, start contacting buyers. Alright? And buyers could be strategic acquirers and or financial investors. Right? It's ultimately a derivative of what the client's goals are. Right? So at that point, the way it works is that we, as investment bankers, we would approach all the buyers that were agreed upon with the client with a teaser, as we talked about before, and an NDA. And then post execution of the NDA, that particular buyer will have access to our SIM. Right? They would have the opportunity to ask a number of questions. Right? We would have conversations with them on the phone. Right? And then at the end of this phase, buyers, to the extent they're still interested, they will submit what we call a nonbinding indications of interest, alright, an IUI. At that point, together with a client, we as investment bankers will evaluate the bids and then make a selection from that pool and really pick those parties where we feel like there is a strategic fit, there's chemistry potentially between our management team and their management team, and then invite them to phase three of the process, which is the meetings and negotiations phase. During this phase which once again typically lasts between thirty and forty days, management and potential acquirer will meet in person what we call management meetings. Alright? We'll conduct site visits, and then the buyer will have the opportunity to access an initial data role, alright, and ask questions. Typically, during this phase, questions are focused on commercial due diligence, really understand the business model of the company, the revenue drivers, the margin profile by project, by service, by customer. Right? Really trying to get a hold of what the business drivers are. And then at the end of this phase, buyers, to the extent they're still interested, they'll submit what we call a letter of intent, an o y. This is a particularly delicate juncture within the entire process because this is the point in time where you as a seller have the maximum degree of leverage. Right? So it's critical that collectively as a team of advisers and the seller make the right decision in terms of how to negotiate, with whom to negotiate the LOI, and ultimately, really making sure that the client has the highest degree of certainty of closing. So this point, execute the LOI, the exclusivity period starts. And it brings us to the last phase which is the closing phase which typically lasts between sixty ninety days sometimes a little more than ninety days depending on specific circumstances and maybe some regulatory approvals but again, during this phase, the buyer would have access to additional information. If anything, it's really open kimono. Right? It's really giving them all they need to finish up their due diligence, which could be which is, in fact, accounting diligence, the char diligence, just it's legal diligence, IT, operations, ESG, you name it. Right? At the same time, negotiate all key legal documents. So purchase agreements, any ancillary documentation, and then really swiftly run to the finish line and and then really close sign and close the deal as soon as possible. Right? So once again, at high level, these are the key work streams within a typical sell side m and a process. And thank you, Alberta. This is a case study, and I think for now, I'm gonna skip this. Just looking at how much time we have. And if we have time at the end, we'll we'll come back and kinda cover this case study. You know, here are kinda eight eight different pitfalls to avoid. And and just looking at these guys, I think we've covered, kinda touched upon quite a few of these. So maybe we can go around. Everybody can just talk about one, either one of these or a different one. Maybe kick it off with Amy if you wanna cover one of these. Yeah. Happy to. Why don't I talk about the very last one? So lack of specificity and detail in the LOI. And I think that Alberto did a super job sort of laying out where that comes up in the life cycle of a transaction. And I will underline and agree with entirely something super important that Alberto said, which is that when you are negotiating the LOI, it is the time in the deal when a seller has by far the most leverage. So it's extremely important to use that leverage and to be get as much detail about the transaction and what is important to you into that LOI as is possible. And I'm not just talking about the purchase price, which of course is important, but if you care about things like post closing recourse against your transaction proceeds or post closing noncompete restrictions that you're going to be bound by or real estate matters or employment agreements that your team is gonna get. You know, anything else that's really critical, you should push to have that addressed and kind of hammered out at the LOI stage. And, you know, doing that and asking for what you want then and not waiting, really will best position you to get the terms that you want in the purchase agreement and the actual definitive legal documents. And I say definitive legal documents because it's important to understand that the terms of the LOI, other than the exclusivity that you're going to give the buyer that Alberto described, that is legally binding. The other terms of the LOI, purchase price, indemnification, restrictive covenants, etcetera, those are typically nonbinding. But, really, in terms of m and a market practice, they set a very firm precedent around expectations of the parties. And it and once it's in the LOI, even though it's nonbinding, it's pretty hard for a buyer to walk away from the agreed upon LOI terms down the road without having a really good reason to do so. And if I'm your lawyer, I would make sure that you could terminate that exclusivity that you've given to the buyer early, if a buyer does retrade on those very specific terms that are in the LOI. So I think that, that that's an important thing to keep in mind that leverage, is super important, and it goes away after exclusivity is given. Yeah. Absolutely. I mean, that topic is one of my favorite topics. So it's one thing I learned early and and one thing I I always teach new new folks. Chris, you wanna you wanna cover one or anyone. you want? Sure. So I, you know, I think we already kinda covered the the tax structuring kinda. conversation a little bit earlier in the in the process. I'll hit though just the discussing value with an acquirer before hiring an m and a advisor. The the reason why I've I've mentioned this one is that, you know, we as a as a tax accountants, attorneys, we can do a lot later on in the transaction. There's a lot that we can help with. But at a certain level, if you're not comfortable in advance, there there's kinda nothing we can do for you if you've gotten the wrong value. I I I'll tell the story. I had a a client who came to us about two weeks before closing. Didn't really have much of a team in place, but we helped out with, you know, some of the tax questions in terms of the transaction, some networking capital analysis. We were able to kinda move the needle. And that transaction was supposed to close on a Friday afternoon. I thought everything was wrapped up. I I went out. I was about to walk into dinner with my wife. I got a call from a client who says, Chris, can I ask you a question? Sure. Happy to. We got a few minutes. She's my wife's running a little bit behind. And he says, is this a good deal? Should I, like, should I sign? And I was like, I I'm not gonna tell you this. This is the wrong time to ask that, and I'm the wrong person. Right? I'm a tax guy, and I've I think I've learned a lot from Bob and Alberto over the years of working with them. But whether this is a good deal or not, whether this is a good transaction for you is a a much broader question that I I can't really answer. And b, you're you've gone all the way down this road. You're up. You this this person in particular was ready to basically retire, you know, sign the contract and drive off to his retirement home. And and so there was a lot invested in that. And so there was a question long ago, right, that that hadn't been addressed. And I I get frustrated. I I feel bad for my clients in that scenario because there's a level of being comfortable with having gotten a good deal that I think is very, very important that I think you need this whole team to get comfortable. But at the same time, that's almost we can't make up for that original value question in the end. We can do a lot of work and we can help you in a lot of ways, but that's sort of it's so fundamental to the original thing. Thanks. Thanks, Chris. Alberto, you wanna pick one? Yeah. For sure. For sure, Bob. I I'll I'll like to briefly talk about selecting the wrong acquirer, which, once again, elevates the risk of the deal not closing. I think this is one where it it's it's about it's about experience working on transactions. Right? It's about determining whether that particular acquirer has the financial wherewithal, number one, to close a deal. Right? Then number two, really vetting vetting the fit. And it's an it's not only the operational fit or the strategic fit, but it's, I'd say, predominantly the cultural fit. Right? It's about chemistry between individuals. Right? It's or amongst individuals. It's not it's not immediate. It takes time. And that's where, to me, it's so important that there is a there is a team of trusted advisers that comes into play and helps make that determination. Right? Because I've worked on deals where I was I was brought in as an MA adviser, and the client had already picked the party. But I personally didn't feel good about them. Right? So it it's about it's about understanding the transaction and also understanding your alternatives. Right? There's not only that particular buyer out there. Right? So it's it's really a balancing act. Right? But once again, it's about closing a deal and and making sure that the client's goals are being accomplished and value is maximized. Right? You don't wanna waste your time with a buyer. Right? That's that's gonna be disruptive. So I'll pause there, Bob. Okay. Super. You, you you stole the one I was gonna cover. Alright. I I think we've covered the main ones, so I think we're good there. Sure. Yeah. You know, again, we're just kinda being cognizant of time. I don't wanna get to Chris and say, Chris, you got sixty four seconds to cover some tax items. So, you know, maybe I'll just cover one item here. And and if we have time, we'll come back. But, you know and and, again, this deck will be available. These were just some different different real life deal challenges. And and I'm gonna pick one, transaction we worked on quite a while ago where there were two owners. One of the owners was retiring. The other owner that brought in a lot of the business was gonna be continuing, and it he was also gonna be keeping I think it was maybe 20% of the ownership. Okay? It was a deal with a private equity. It was actually an add on. So it wasn't it was an add on to a platform that the private equity had. This guy was important. He was gonna be wrong over equity. So we're literally two weeks from closing, and the buyer does background checks, which is pretty much every buyer will do background checks, and find out that that particular owner had filed personal bankruptcy twice. K? And that killed the deal. And it really killed the deal because it wasn't disclosed. We didn't know about it. Perhaps we should have known, but, you know, it wasn't known. It wasn't disclosed. And they looked at it as, hey. This is supposed to be our partner, and this wasn't disclosed to us, and that was it. So we literally had to remarket the company and obviously deal with that upfront, and and we did get the transaction done. But the point is your advisers need to know everything. They just need to know everything. And if we know it, we can deal with it. Okay? So from that, we'll move on. We'll come back if we have time. Again, here, guys, letter of intent. Again, this is that six or seven page document that we just talked about and Amy covered. Again, Alberto, maybe you can just start and and kinda cover some of the the main topics, and then and Chris and Amy can can, For sure. can share some different thoughts there as well just to give them, an understanding of of what that seven page looks like. Yep. Yep. Yep. Absolutely. So let's start with the first one at the top. So cash free, debt free. What that means is that, generally speaking, a transaction is being consummated on a cash free, debt free basis, which means that the seller keeps the cash, alright, and at the same time pays off the debt at closing. Alright? Very simple. Cash stays with the seller unless there is a a portion of the cash that is, I like to call it restricted or is a function of customers having given the seller deposits or or advanced payments, and the debt is being paid off at closing. Now what do we buy debt? Debt is a combination of interest bearing liabilities. So think of a revolving line of credit or a term loan, and then any obligations towards the IRS out of third party providers and or employees, alright, such as unpaid bonuses, just one that comes to mind. But we'll spend thirty second seconds on the working capital or networking Yep. capital. Alright? Sure. So working capital because we get this question all the time. Alright? So working capital is defined as current assets minus current liabilities. Alright? Very simple. Net working capital is the same concept but cash is being stripped out of the working capital. And why is that? It's because cash stays with a seller so you don't wanna double count cash. Alright? Now when a potential acquirer acquires a company, it acquires the company as a going concern. In other words, the the company has to have sufficient funding to be able to operate at the current level. That's why seller and buyer work collectively to derive what we call a target networking capital at closing. Right? Which is basically a proxy of what of what of what the net working capital should be if the company were to run at the current level. The net working capital target is typically calculated over six months, nine months, or twelve months, right, of of operating performance. Then at closing, the seller would provide an estimated closing balance sheet, which would be compared against the net working capital target. Now if the delta is positive, meaning the estimated net working capital at closing is greater than the target, there will be a positive adjustment to the purchase price. And then the opposite, if if the estimated net working capital at closing is lower than the target. So fast forward ninety to hundred and twenty days post closing, the seller would provide a final closing balance sheet. And then the difference between the final closing balance sheet and the target that closing would be trued up. Alright? So it's not about making money here. It's about being fair between seller and the buyer. Alright? Last thing I'll say very quickly on consideration, and then I'll pass it on to to Chris here. Consideration includes cash, pretty straightforward. It could be just cash, alright, or a combination of a number of different considerations, including a rollover equity, which is a portion of the proceeds is being rolled into what we call the new call. Right? So the new the new company purchasing entity, alright, which typically happens in the context of a private equity deal. And then an earn out, right, which is a contingent payment based on specific, milestones associated with financial performance. And then lastly, seller note, which I I like to describe as a loan that the seller gives to the buyer that the buyer will eventually pay back, alongside a coupon, which is call it six, seven, 9%, typically seven to 9%. Alright? So could be only cash or a combination thereof. Pause, there. Alberto. Chris, do you wanna comment here or wait till you tax action? Up to you. I'll make a couple comments here because I think this is important in these context. The the two things I would say about LOIs here real fast. So the point about, roll Albert was just talking about rollover equity. From a tax perspective, it's really important early on in that LOI to confirm whether that rollover equity will be tax deferred. Right? That you you're able to be able to to take that rollover equity without tax on it. The reason why is that, you know, that is not cash. Right? Unless it happens to be shares in, like a public company or something like that. That's not a liquid asset. And generally, you wanna be able to avoid paying tax on that the day of the transaction. However, that's really a structural question that in a lot of ways is controlled by the buyer in terms of whether they're able to provide that to you. So that's just an important question. If the LOI doesn't say that the rollover is go rollover equity is gonna be tax deferred or or says tax free, you're gonna wanna ask that and just understand it. Right? It's not a good or a bad thing, but you you want that answer as quick as quickly as you can. The stock versus asset purchase, we covered a little bit before, but I'll just make one point here in the LOI that sometimes you'll see some things that say, well, it doesn't say anything in the LOI about that. I said, yes, it does. Because it'll say something to the effect of, you know, structure transaction will be structured in a way that is tax efficient for the buyer. Okay. Well, that means they're trying to do an asset deal. Right? And that kinda just highlights the what can be important about having your LOI reviewed by professionals who've done this work because there are things that might not pop off the page at someone who hasn't done this before. We go, oh, that's what. that means because that's how it reads in a lot of these, transactions. Go ahead. Thanks, Chris. Amy, it'll leaves you about ninety seconds to, see what you wanna cover in other terms. Okay. I'll try to go super quick. So the other terms are, like, all of the other things other than the very important economic terms that Alberto talked about. So you can see on the slide all of kind of the different flavors of things that might be covered in an LOI, and I'm happy to talk with you about any of those offline, but I'm gonna pick two now. So something that's super important to cover is what sort of indemnification obligations the seller might have post closing. And when we talk about indemnification, what we mean is can the buyer come back against the seller after the closing and seek monetary recourse for issues that pop up and cost that buyer money. So, you know, there's a negotiation to be had at the LOI stage about whether the seller should have some level of responsibility for that and might have to write a check post closing to help make the buyer whole for some sort of damage that it has suffered. Or, you know, if you have a strong negotiating position, it's possible to negotiate that the buyer's only recourse for that sort of operational loss that they might suffer might be against a rep and warranty insurance policy that you make the buyer purchase. So there's really a lot of, there's a lot of room on the spectrum for how that gets negotiated. And, again, you wanna use the leverage that you have at the LOI stage to really set yourself up in the best possible position there. If you're not able to get the buyer to agree to go get a rep and warranty insurance policy and really limit the seller's post closing exposure, it's super important that you think about getting a cap stated in that letter of intent because you shouldn't have to come out of pocket for indemnification for more than the amount that you put in your pocket. I could go on, Bob, but I won't, Unless you want me to. Bob, you're on mute. Thanks, Alberto. Yeah. Okay. Right. Thanks, Amy. Yes. There's a lot there to cover. I'm just trying to make sure we have a few minutes for Chris on taxes and a little time for q and a. Next slide, we'll skip over, but this really talks a bit about indemnification caps and escrows and various things and what kinda what we see in the market. Won't have time to cover that, but it'll be in the deck. So let let's cover this slide, then we can kinda move to Chris and some taxes. So, you know, valuations. Right? You know, in the marketplace, business owners, everyone, everybody's heard about multiples. You know, Multiples of EBITDA, the most common multiples of revenue, and and there's some others, but mainly EBITDA and revenue and and, you know, so how does a buyer really determine the value? I mean, how and if they're saying, listen, we're willing to pay an eight multiple, well, how'd they get there? Right? And, you know, good example is you can have two companies. They do the same thing, whatever it is. They do the same thing. They both have the same level of EBITDA or whatever. They both have 5,000,000 of EBITDA. One sells at a seven, one sells at an eight. You know, what what's the difference? Other than whoever sold at seven didn't hire the right investment bank. That that aside, why are they different? And and maybe the difference is growth. Maybe the company that sold for an eight multiple has been grown at 10% a year. It looks like they're gonna keep growing. The other company's been grown at five. Maybe the company that sold for seven multiple doesn't have a strong management team. The other does. Maybe it's diversification. You know, one company had a lot more customer concentration the other. So it gets down to those specific things that made those two companies that you would think would trade for the same trade different. Right? And all of these factors on this page go into determining value. Okay? So the growth, you know, both past and future, very important. The the profit margins. Right? Companies that have stronger margins trade at better values. Because when I generate a dollar of revenue, I can drop 15% to the bottom line versus a company that can drop 10%. The diversification of customers and vendors and products, the capital expenditures that might need to go into the company. You know, all those things play into it. And then when you talk about the revenue nature, right, you get into industries almost. So you can have an industry that trades at very high multiples like software. K? They trade at very high multiples of EBITDA and revenue because typically, the visibility into their revenue is very strong. They've got long term contracts. They've got recurring revenue versus contract business where maybe it's project oriented. Right? You get a project. When you're done with that project, you're done. Take an investment banking firm, an m and a firm. You know, if we're selling an m and a firm, they get that client completed, they get a fee, and that's it. They're normally not getting any more revenue from that client. So trades that are are less multiple. The other thing I'd point out is size. Right? A $50,000,000 EBITDA company, regardless of what it is, call it a distribution company. They get 50,000,000 of EBITDA. The other company is 5,000,000 of EBITDA. Well, that larger company has more diversification, more sophisticated systems, the larger customer base, bigger etcetera, etcetera. The larger the company in general, they're gonna trade at higher multiples. Okay? So that comes into play. So all that kinda determines the value, and then buyers will do things called the discounted cash flow. They'll project out the revenue and the cash flow going out, look at the investment amount they're putting in, and actually look at their their potential investment returns, and they wanna be in a certain area. They'll look at comparable deals that have traded and what multiples that they traded at. So that's kinda in a in two minutes what what goes into kinda looking at value. So, Chris, I think we kick it over to you. We've got about sixteen minutes. We should leave, you know, at least seven or eight minutes for queue of, for some, questions. So whatever you think you can cover in, you know, six or seven minutes. Yeah. I'll just take a a couple of quick things. I think we've hit on this at some level already. I think these are what are on these slides are sort of key items where look. It it can be very hard to talk about tax in great detail until you have some level of an offer on the table to understand and analyze. You know, they're you you know, while we always talk about getting people involved early, there is such a thing as trying to do things too early sometimes where you're working off of very hypothetical numbers and you don't really have a good answer as to what is the transaction is gonna look like. But there are some things that you can have a conversation about with an adviser early on to understand sort of risk factors. We've talked a couple about these before, sort of the stock versus an asset purchase. An asset purchase introduces the potential that some of your gain might not be capital gain, which is which could obviously would be a different tax rate. State issues can be important. Corporate versus flow through. Right? If I'm a partnership or an s corporation, those are gonna provide very different answers in terms of a a sale of a business transaction. Sometimes for a partnership especially, because buyers are are pretty agnostic, on acquisitions. There can be some structuring that a seller needs to do to get the most optimal structure for them in advance of of the transaction. Domestic versus international, that can a lot of ways be just a very much a, a a complexity item. Right? Are there international questions here? Are there potentially other countries who are gonna be, involved? That's gonna be a a bigger issue. And the carve out versus the whole company, right, they're the just the questions of of kind of what is moving over, what is the transaction gonna look like. A gross up here, I'll just take a a again, just one sentence here that a gross up is is meant to cover if a a transaction is good for the buyer, such as an asset purchase, has a negative impact to the seller. A tax gross up covers for that. It says, hey, buyer, you're gonna get this advantage. As a seller, all I want is to be put in the exact same position as if I had, for example, sold my shares. Right? If I'm in this is especially true with s corporations where that difference is so great. But this can be an important concept. And again, an important thing to get as an idea to get into the LOI. You can get the idea in that, hey, if there's a consequence, we'll have a gross up. Put that into the LOI. And then, you know, to make that determination later on down the line. And tax due diligence, this is again, Bob's talked about this, but just the idea that people are going to be looking at your tax returns. You're gonna wanna get prepared and make sure that you understand, what order they're in. You know? Perhaps there's an issue you haven't been addressing. And again, that can be a small issue. But as someone who does tax due diligence on the buyer side, I can tell you a lot of ways, it'll go much more smoothly if you're able to, in advance, explain that issue. Say, hey. We recognize there's an issue, but I I promise you it's only a couple dollar issue. It's it's a a $5,000 issue and not a million dollar issue and explain why. So that's just a really important thing to get out of in advance. And we kinda talked again. We talked a little bit about structuring, and I think we again, I as Bob said, you could get me going. I could talk for a couple of hours about ways to structure transactions and and different ways that could impact different sellers. A lot of it though one thing I'll just note here, a lot of it is very situational. There's a million different scenarios, and while they're big concepts, a lot of it is gonna be is gonna be very detail focused. So keep that in mind. It's why it's helpful to work with people who've done a lot of transactions. They've seen a lot of different things. There's all sorts of things that can come up that can make things better, you know, ways to move things around and make sure that you're not generating extra tax that's not necessary. Thanks, thanks, Chris. You know, and, again, I mean, you wanna get the best value, and that's kind of the investment banker's job. But you also really wanna end up with the the highest net after tax amount. Right? And it really is very, very specific to the situation with the company and the individuals. So whatever you heard from your neighbor or your friend of how they did it or didn't do it, that that doesn't mean that that's how your your deal should be done. And and it's something you definitely wanna get of well ahead of time and should definitely as investment bankers, we wanna understand the lay of the land when we're negotiating that that letter of intent. Yeah. We're gonna skip, this, this. is important. Sometimes ahead. there's that question of sometimes tax is a hill to people get very obsessed sometimes with the idea that, well, I want the best tax answer. And sometimes tax is very important and it's a hill to die on, and sometimes it is not. And, again, good advice surfaces that early so your investment banker can appropriately include it's all part of that process, teamwork. Yeah. Yeah. Yeah. No. Agree agree with you. We were actually just on with a group of lawyers on a letter of intent that we're trying to finalize, and there's a tax issue in there. And and it's about a gross up, and we had a different view than the lawyers mainly because we needed to explain to them our negotiating strategy and why we wanted to leave something alone and come back to it later. Right? So it it's really a team effort there. So I I know we we skipped a couple of slides, and maybe we can go back to one or two if we have a few minutes. We've got about nine minutes left. You know, just looking at some of the questions that came in, one of the questions was, you know, how do you deal with or or how do you sell a company that's been losing money for the last few years? Okay? And so, you know, in our careers, you know, it really every year, we have situations where we're talking with business owners where they've just had a year where they lost money or even a couple of years. So, again, it's it's very specific to the situation. But the way my team looks at it is first, why are you losing money, and when did you make money? When's the last time you had a profitable year, and what's going on? And can that be changed? And does it make sense to bring in a turnaround team, an operational improvement team? You know, can can we bring in people to help get that back to a positive number and then sell the business? And if the answer to that is no or the answer is I don't wanna wait and I just wanna get what I can, then it's really looking at the pure hard asset value of the company. Okay. You know, what would kind of a liquidation or a hard asset value be? It it would be looking at the IP or something that could be very attractive to the right strategic. You know, could the right strategic take this company that's losing money, restructure it with inside their organization, and turn around it to positive, and therefore, we can negotiate off that? So anyway, that's kinda how we would address that situation. Another question here was, what what is a QA v or what's a quality of earnings? Chris or Alberto, what what do you guys wanna just take that? Yeah. I'm happy to take it, Bob. In a nutshell, a quality of earnings analysis is is essentially a way to look at historical financial performance, alright, on on a normalized basis. In other words, being able to identify any expenses that are extraordinary, are nonrecurring, are one off in nature, right, and adding it back to the, EBITDA. Alright? Just for a sake of clarity here, EBITDA stands for earnings before interest taxes, depreciation, and amortization. So once again, it's this concept of being able to hone into the truthful earnings profile of the business. Alright? And again every adjustment to the extent it can be substantiated translates into real dollars. Alright? That's why it's ultimately becomes a a question of negotiation with the buyer but there has to be support for those adjustments. Now I just talked about the adjustments to EBITDA, but the work the the the quality of earnings analysis goes beyond that. Right? It looks at working capital. Right? To a certain extent, also helps in determining the target net working capital amount of closing. Right? It looks at debt and debt like items. Right? It looks at the balance sheet. Right? So it's a fulsome analysis of the entirety of the company. Right. So hopefully. And and yeah. Go ahead. yeah. I was gonna say and and and sometimes on the buy, you know, the buy side quality of earnings, they might even look at some of the projections and and help that buyer, you know, look at some some of the underlying assumptions, how the business is performing with that. Right? Yep. And then the other comment we'll just say is, you know, pretty much every buyer is gone every buyer is gonna do a financial due diligence. Most buyers hire a firm to do what's called as quality of earnings. But what's become very popular, and and we do it a lot now, transactions, is you do a sell side quality of earnings. So, literally, we have a firm that does the quality of earnings for the seller upfront. This way, we identify any issues. We're prepared. There's no surprises. The deal moves faster. The buyers love it, and now they're still gonna do do their own. Just looking at some any other questions here that now are just coming in. Let me just so here yeah. Here's the question. If if a buyer wants an asset purchase, but the seller wants a stock sale, how does that get resolved? So, that obviously does happen all the time. I'm gonna say one comment and then throw it over to our expert. You know, many, many of our deals are stock deals, but treated as asset purchases for stock. But this question, Chris, is, you know, the buyer wants an asset purchase, the seller wants a stock. How how do we get that resolved? Yeah. And usually, you know, we glance past it, but usually the gross up is that bridge. Right? To say, you know, if if a seller says we're gonna sell if I was selling stock, I'd be paying a $100 in tax. If I'm selling, my assets, I'm gonna pay a $120 in tax. The answer is, well, buyer, presumably, you're getting a benefit from doing that asset deal. That's why you wanna do it for the most part. Occasionally, there can be issues with the business that really push that from other non tax reasons. But usually, that tax benefit is the driver there. You say, okay. Well, if you want that benefit, you're hopefully, you'll agree to pay me $20 plus as what's an additional amount that covers the taxes that relate to that. And so that's a pretty standard conversation if a buyer is not willing to engage or understand what a gross up is. That I kinda call that a red flag. And sometimes, you know, again, depending on the scenario when you present to a buyer, how how big the gross up would have to be, their perspective is, well, you know, that's fine. Our benefit would not be that big. And the answer is we will do a stock sale. I mean, the one I talked about before with that Florida versus New York thing, that was the resolution. Right? That the buyer said, you know what? Our benefit is not nearly as big as the penalty you would face from doing an asset deal. And so we think it's more reasonable. We'll just gonna we're we're gonna do the stock purchase. And so that's part of the negotiation there in terms of what's the benefit to both sides, and having that fulsome conversation early on so that both sides can just get to the right structure for the deal. Yeah. Okay. Great. No. Thanks, Chris. You know, here's a question. Excuse me. How are annual bonuses handled in looking at the profitability? If you've got annual bonuses every year, it's just part of your normal operating expenses. They're all all part of your normal expense. They don't get changed to carved out. If you're doing deal bonuses for the transaction that's different, that would be excluded. You know, a question around having a business with 95% recurring revenue, strong profit margin. Should there still be a working capital target? Again, when any buyer looks at a business, they're looking at a cash free debt free basis with the assumption that they're taking over your balance sheet to continue to run the company. Okay? So, again, they're they will get the working capital, in in in that situation. But it might be a low number. Right, Bob? I mean, again, nothing about that says specifically what that number would be. Depending on the scenario, you could. have a low right? I mean, there's a million variations there. So Yeah. Yeah. I I absolutely. And it it it, again, depends on, right, depends on the specifics of that company and and that transaction. So, I mean, I gave a very high level answer, but, you're you're absolutely right. I'm just trying to say if there's anything else. Anything else we missed? Might be one or two others here. Alright. I I think that's pretty much all we have time for. If there's a couple other questions left, we can get them answered. I'm gonna just turn it back over to to Cindy to close out. Thank you for everybody attending. Thank you for the whole panel, and I'll turn it back over to Cindy. You're on mute, Cindy. Thank you. Sorry about that. For those of you that still have some questions that may have not been answered, we're going directly have our panelists get back to you on those questions. So thank you so much, and we really appreciate, I mean, the wonderful expertise that has gone on here. All people will get in the slide deck. Please let us know at the center if you have any follow-up questions. We are here to serve you. We're so thrilled that these speakers have taken the time to to be with us today and everyone out in the audience, as well. Thank you for your time. This is really an important topic, and we appreciate the time that you've given it. And over to Harlene. Thank you, Harlene. Alright. Thank you, Cindy. And thank you to all of our speakers. And thank you everyone for attending today's and final session of our Product Business Owners Succession Academy webinar series. If you have not completed it already, we have launched our survey located in the survey tab of your panel. A copy of the PowerPoint slides and a recording of today's webinar will be made available to all attendees via email four business days post event. CPE certificates for those who are interested and answered all five polling questions will be issued within eight to ten days via email. Thank you again, and have a great rest of your day. Thank you. Thank you, everybody.