Pest Management Professional, September 2017
Merger Guide Whats the intent of the deal A letter of intent spells out the intentions of both buyer and seller in an all encompassing document By KeMp Anderson Contributor M ost owners sell one business in their lifetime But selling a business is very different from selling anything else you may own To maximize the sale the seller should understand the process of a sale or transaction Sellers typically start with a simple thought or urge to sell Im ready to sell or I want to sell From that point how do you prepare Whats involved As you move through the process what documents will you see One of the first and most important documents you will see is called the letter of intent LOI This is the backbone of the deal This document can be described as a deal in principle that sets up the asset purchase agreement APA which is the deal in detail The LOI is typically three to five pages whereas the APA can be 10 to 100 pages The LOI has several basic components for which you should prepare The following items are fairly standard in LOIs for the pest management industry 3Buyers 3 assumptions the best guesses the buyer has made to make the offer that gets proven by the buyer during due diligence The standard and general assumptions to be proven are Revenue and profit Customer base and related details Recurring base of business Fleet data Assets Employee related data Accounts receivable Buying is based on these primary assumptions After due diligence the offer may go up or down If you are prepared with sound information prior to going to buyers your offers should be stable or go up 3Deal structure either asset or stock purchase in almost all cases asset Without limitation the buyer will receive at close and allocate value to Goodwill customer lists and details all active pending and canceled accounts Company names websites etc All supply related to the business such as inventory and equipment furniture software computers and intellectual property All accounts receivables Fixed assets and fleet 3Excluded assets items the seller is not selling These should be disclosed up front and can include Sellers cash and securities Insurance rights and policies Property Sellers personal belongings such as vehicles phones and assets 3Purchase price and terms This critical part of the LOI may include Cash paid at close Money paid in a note for a number of months at an acceptable interest rate An agreed amount for accounts receivables A R usually dollarfor dollar under 90 days paid at i close based on an A R report run the morning of close Money for non compete of owners all buyers require noncompete clauses Money for transition services or a consulting agreement with the seller Rents and utility if applicable and other assets 3Human resource HR liabilities Some HR liability where the company or seller owes the employee benefits can include MG8 September 2017 Pest Management Professional mypmp net
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