Prep to Sell – Getting Ready for an M&A Exit

OK, so you have made the decision to explore a sale of your company.  What can you do to make the deal go smoothly and put your best foot forward?

1. Clean the House.  Ask your outside counsel and accounting teams to help identify outstanding record keeping matters.  Are your material contracts signed?  Are all arrangements with employees and consultants documented?

2. Got an Audit?  Consider whether you need to complete a formal audit (whether GAAP compliant or otherwise).  Ask your accounting and legal teams what is standard for a company your size.  Will an audit help buyers have more confidence in your results?

3. Master Due Diligence.  Once a buyer is interested in your company, transactions move very quickly. Get ahead and look sharp by organizing and cataloguing key contracts, financing documents, employee arrangements, financial information and other key diligence materials so they are ready for review.

4. Understand Potential Triggers.  Review material contracts and investor documents for change of control and assignment issues so that you understand if any key customers, suppliers, lenders, service providers or stockholders have consent or notice rights in connection with an acquisition.  Understand the stockholder vote required to complete a transaction.

5. IP Matters.  Confirm that you own or have valid rights to all IP used in your business.  Have all employees, contractors and inventors executed inventions and assignment agreements that properly assign IP rights to the company?  Do you have contracts for all material IP used by third parties or your company?  Have you recently conducted a source code scan?

6. The A-Team.  Put the right team in place to execute the deal (including outside advisors – legal, accounting, financial).  Consider your expectations for continued employee roles in connection with a potential deal.

7. Cap Table and Equity Grants.  Have every single stock issuance and equity grant been authorized by the board and properly documented and executed?  Buyers will tie out these numbers very carefully.

8. Check the Box on Regulatory Compliance.  If your business is subject to regulatory compliance, ask outside counsel to help you understand compliance and best practices (e.g., import/export compliance, governmental permits and licenses, data security, consultant status, etc.).