There are many important considerations that face a company’s management team in preparing for a transaction: enterprise valuation, industry multiples, managing key client relationships, management team focus and delivering the news to employees are just a few.  However, there are several items that we consistently see receiving little focus, or are focused on too late, that can have a material impact on deal proceeds and the closing process.

Having GAAP Financials

Scott Stone

Financial statements prepared according to GAAP or IFRS are critical, especially if a sophisticated or larger buyer is involved. Any differences in accrual methods of the seller and the buyer or GAAP will work against seller.  Vacation and PTO accrual are a good example, as differences in accrual methods will either come out of the seller’s pocket or will negatively impact employees, thus straining the relationship between buyer and seller.

Establishing Target Working Capital
Pay attention to this early, preferably before going to market.  If seller is not prepared to understand how it will function, they will be unable to defend themselves in final negotiations – and it will cost them cash at closing.  The structure of the working capital calculation and the company’s working capital cycle should be taken into consideration when deciding when to take the company to market.  Depending on structure and timing, the seller may find himself inadvertently financing a significant portion of the sale of the company.

Establishing Timeline Expectations
Setting sellers’ expectations at one year for the sale of a business is hard enough, and becomes even harder if buyers submit a bid with an unrealistically short period of exclusivity.  Buyers should be asked to resubmit a bid with a more realistic timeframe, or the bid value itself should be discounted in the auction.

Blair Badham

Maintaining a Competitive Environment
Having more than one bid is not enough. Sellers should not put themselves in a position of needing the transaction to close for financial reasons, or they will risk turning over complete control of the process to the buyer.  Therefore, messaging about the reasons for sale are extremely important in the early stages as well as in the final stages of the process, and alternative bidders should be kept “on deck” so the seller has options if the deal falls apart.  Simply put, if the seller is going to walk away, or threaten to walk away, they need a place to walk to.  It’s also important to manage the seller’s interaction with buyer representatives when discussing deal points – if the seller falls in love with the deal, a valuable bargaining tool is lost.

Paying early and close attention to these four items will help sellers maximize their cash at closing and also allow them to arrive at the finish line in a more predictable and less stressful manner.

For more information about preparing your company for a sale or any other BSA service offerings, call 877.832.7629 or contact any member of the Butler Snow Advisory Team.

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Butler Snow is pleased to announce that Steve Groom – former chief legal officer of CoreCivic, formerly Corrections Corporation of America, and long time executive – has joined the firm’s Nashville office. He will serve in a dual capacity as a principal in the firm’s business advisory subsidiary, Butler Snow Advisory Services (BSA), and practice in the law firm, Butler Snow, in an of counsel role.

Steve Groom

Groom has extensive business, financial services and dispute resolution experience, and most recently was executive vice president, general counsel and secretary to CoreCivic, where he will continue to serve as special counsel.

“Steve is a successful executive, who has broad corporate and legal experience, and not only will he be an asset to the firm but will help spearhead Butler Snow Advisory’s efforts in Nashville,” said Donald Clark, Jr., chairman, Butler Snow. “Steve has played a significant role in the executive leadership team at CoreCivic, and we are thrilled to have his strategic counsel and legal experience available to our team and our clients.”

Throughout his career in the corporate world, Groom has gained experience and knowledge in the areas of corporate governance and strategy, risk management and compliance, banking and finance, leadership training and development, as well as a significant involvement in mediations and arbitrations. Groom is a Rule 31 listed general civil mediator.

“I am excited to join Butler Snow’s Nashville team and look forward to working with both the law firm and its business advisory subsidiary”, said Groom. “As a client of the firm for the past 15 years, I have the greatest respect for the firm’s competence and professionalism. The added benefit of having the opportunity to leverage both my legal and corporate advisory experience for the benefit of both entities’ clients makes Butler Snow a great fit for me.”

In addition to spending almost a decade in the private practice of law before joining CoreCivic, Groom served for 11 years in executive, senior management and general counsel roles with SunTrust Banks, Inc. He began his career as a banker with Memphis Bank and Trust Company.

Groom serves on the board of advisors of Lipscomb University’s Institute for Conflict Management and is an adjunct faculty member teaching mediation, negotiation and conflict resolution. He serves on the board of visitors of Lipscomb University’s College of Business and the board of directors of the American Cancer Society.

Groom is a member of the National Association of Corporate Directors, Society of Corporate Compliance & Ethics, Tennessee Association of Professional Mediators, International Institute for Conflict Prevention and Resolution, Association for Conflict Resolution, Risk Management Association, Tennessee Bankers Association, Bank Lawyer’s Committee, Tennessee Bar Association, Nashville Bar Association, Dispute Resolution Resource Center and the International Association of Privacy Professionals.

Groom received his undergraduate degree from Lipscomb University, where he ran track and cross-country as a scholarship athlete. He received his Juris Doctor from the University of Memphis Law School, where he was a member and author of the Law Review.

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