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The CPA’s Role In Helping a Client Sell Their Business

August 12, 2014

Selling a business is a one-time process for most owners.  Here is a description of the people involved in the process and particularly the CPA.

Clients wishing to sell their business will likely will need an investment banker or business broker to identify and find the buyer. Their role includes the presentation of the company in its best and most favorable position and to assist in the negotiation process as part of the team.

The lawyer is necessary to prepare and/or review the contracts, legal issues and assist in the negotiations and to put the seller in the best legal posture with the most protection.

Other professionals that might be needed will be a business appraiser, investment advisor, and an investigation service to perform a due diligence review of the buyer.

The CPA’s role would be to prepare their client for the maze of events that lead to the culmination of the transaction; and then to be there afterwards to financially ease them into their new situation or status.  The CPA would monitor the negotiations and contracts to see that they are on target with the client’s wishes and goals and to also be there to help the client and team quickly adapt to changing situations.

Accountants most likely have been the closest financial advisers to their clients over an extended period under varying business climates and conditions.  CPAs have learned how their clients think, what is important to them and what values they have. I feel that we understand best (as much as any adviser can) what our clients actually want out of a deal – not just closing the deal – but why they are doing it in the first place!

It is the CPA’s talent and role to help their clients articulate his or her thoughts, actually decide what they want and to discuss if it is realistic and practical.  Sometimes clients simply want far more than is sensible for a buyer; other times business owners sell themselves and their businesses short and underestimate their real value in the marketplace.  To that end, the CPA would assist in identifying unique and/or strategic value for a particular class of potential purchasers.

The CPA’s role is also to develop the tax plan that determines the nature of the income and assist with the allocation of the purchase price (with appropriate appraisals). Estate tax aspects are also considered. Where an earn-out or extended payment is part of the price or terms realistic provisions can be constructed, and parameters and safeguards developed for monitoring the post-sale performance.

Usually some sort of selling memorandum will have to be prepared. CPAs will work with the client’s staff to develop raw data in the financial area, assist in the preparation of any projections and help with necessary recasting of the financial statements.  Minimally sellers need to present the previous five years’ financial statements and tax returns, details of their largest customers, vendors and key employees, warranty claims, contracts, leases, methods of obtaining sales, delivery of product and services and descriptions of the day-to-day activities of the owners that would be leaving.

For many, there is only one opportunity to get it done right.  It is essential that the proper team of advisors be assembled to assist in getting it right.

One Comment leave one →
  1. 6hawthorne permalink
    August 12, 2014 5:55 pm

    Hi Ed you always need someone to work out the numbers Bob

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