Many family business owners confuse their ability and success in running their family businesses with the ability to effectively orchestrate the sale of the business to a third party. The excerpt below from an article in the current edition of Family Business Agendais an excellent summary of common mistakes that are often times made with respect to selling family businesses.
7. Mistakes to avoid when selling your family business. In the current issue of Family Business Agenda, Dennis J. White of the law firm of McDermott Will & Emery LLP warns readers of ten common mistakes made by family business owners when they try to sell their companies. Here are five of them: 1. Failure to integrate estate and business planning. Without appropriate planning, effective control of the business can be spread among a disparate group of beneficiaries with very different levels of business acumen and varied objectives. Such arrangements often result in stalemate and disaster. 2. Failure to line up the family members. If the selling group appears to be in disarray, some potential buyers will not even spend the time to investigate the opportunity. One approach is to designate a single person as the selling group's representative and negotiator. 3. Failure to assemble an experienced team. Family business leaders are often out of their depth when it comes to an M&A transaction. Moreover, they often avoid or delay engaging a team to help them maximize value. 4. Failure to prepare for due diligence. A buyer who is truly interested will deliver to the seller a lengthy and detailed due diligence questionnaire. All too often, inexperienced sellers are unprepared to complete these forms. Well-advised sellers anticipate the suitor's questions by setting up data rooms, often electronic in nature, where all the information is waiting. 5. Failure to properly structure the deal. If planning is undertaken early enough, the sellers can structure the operating entity as an S corporation or an LLC and avoid corporate-level tax.
Know Your Business. Grow Your Business. Protect Your Business Dan A. Penning --------------------------------------------