Buying & Selling a Business: A Panel Discussion on What You Should Know

Transcription

1 Buying & Selling a Business: A Panel Discussion on What You Should Know 2013 Spring Client Seminar Presented by: Brian Rogers, Member Gene Schmittgens, Member Gerald Richardson, Member Don Kelly, Member Jim Borchers, Of Counsel Evans & Dixon LLC 211 North Broadway, Suite 2500 St. Louis, Missouri ; Fax

2 Buying & Selling a Business: A Panel Discussion on What You Should Know Presented by Brian Rogers, Gene Schmittgens, Don Kelly, Gerry Richardson, and Jim Borchers April 25th, 2013 What s a Business? Assets Liabilities Equipment Real estate Inventory Intangibles (brand, trademarks, etc.) Accounts Receivable Bank debt Payroll Accounts payable Taxes

3 Diagram of Target Company Diagram of Buyer Pre-Transaction Diagram Shareholders Cash Buyer Target

4 Two Types of Transactions Asset Sale and Stock Sale Asset Sale Result of Asset Sale Shareholders Target s Assets Cash Liabilities Buyer Target

5 Stock Sale Shareholders Cash Buyer Target Result of Stock Sale Buyer Stock of Target Shareholders Cash Target Process: How the Deal Gets Done

6 The Deal Process Confidentiality Agreement Letter of Intent Due Diligence/Purchase Agreement Sign Purchase Agreement Close Due Diligence Kicking the Tires Photo Credit General Corporate Information Other Liabilities; Contracts; Commitments Borrowings Litigation and Claims Assets and Real Property Intellectual Property Matters

7 Competition and Trade Regulation Insurance Employees/Employment Matters Environmental Matters Tax Matters Compliance with Laws 2. Contracts 2.1 Copies of real estate leases. 2.2 Details of non competition agreements. 2.3 Purchase and sale contracts in excess of $25, Copies of contracts that aren t assignable. 11. Tax Matters 11.1 Copies of all federal tax returns for the last three tax years Copies of all tax auditors reports Copies of all agreements waiving or extending the statute of limitations for audit of any tax returns.

8 Matters Uncovered During Due Diligence Can Affect Value Unanticipated environmental liabilities Litigation risk Cloud on title of intellectual property Poor inventory practices Uncollectible accounts receivable Short term customer contracts Unpaid taxes Case Study Handling Liabilities The Company agrees to sell to the Buyer, and the Buyer agrees to purchase from the Company the following assets: the inventory, the equipment, and the trademarks. The Buyer does not assume any liability or obligation of the Company. The Company remains liable for all of its liabilities. Case Study Handling Liabilities Assets are sold subject to existing liens Unpaid taxes follow the assets Product liability exposure might follow the assets A buyer who acquires contaminated property might be liable for clean up costs Assets might be subject to claims of the seller s creditors under bulk transfer laws Lien imposed as a result of termination of singleemployer pension plan

9 Case Study Handling Liabilities The Company represents and warrants to the Buyer that all required tax returns have been filed and all taxes have been paid. Case Study Handling Liabilities The Company agrees to indemnify the Buyer from all losses arising out of the breach of any representation or warranty. dixon.com Rogers

10 Environmental Due Diligence What is it? Depends on who is asking: Seller Buyer Different interests Environmental Due Diligence How do we do it? Simple answer: No different Different skills Checklist Team Environmental Due Diligence When do we do it? Simple answer: Before you buy the business For all the obvious reasons

11 Environmental Due Diligence Real estate = most time Other issues Reporting Operating entities Accounting Insurance Environmental Due Diligence

12 Buying & Selling a Business: A Panel Discussion on What You Should Know Notes:

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