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Successful Exit Plan and Sale of a Business Entity

THE CHALLENGE

The client had little to no oversight into their finance and accounting department. They also had under-qualified people performing tasks they shouldn’t be doing for their current skill-set and qualifications. This issue is not uncommon due to a lack of education around the correct structure in an accounting department. Additionally, there’s no monthly close process, and the business was not GAAP compliant. They were also exploring the option to sell one division of the company that was intertwined with multiple entities making it very challenging to value.

Signature Analytics’ Solution:

We provided proper education and training of internal staff. Our team provided comprehensive educational training to the internal accounting department. This training gave the employees a better understanding of our process and why specific reporting was required to improve their finance and accounting functions. We utilized their internal team by placing people into the correct roles and responsibilities they were qualified to perform.

We ensured the company was GAAP compliant and moved to a monthly close process. Our team developed and implemented new processes to ensure the business was GAAP (Generally Accepted Accounting Principles) compliant, which is standard practice. We also moved the client to a monthly close process and developed more accurate, relevant, and timely (ART) reporting while leveraging their internal team to stay cost-efficient. If we have not added tremendous value by putting processes and structure in place, the business would have been sold for a significant discount during the sales negotiation process.

We managed the carve-out process and sales negotiation of the business entity. Our team had to carve out and establish “one entity” for the division that the buyer was interested in purchasing. We used Pro-forma financial statements in addition to GAAP to provide a better understanding of the new entity’s operating results. After understanding the new entities operating results and real value, we managed the sales and negotiation process for the CEO when being acquired by a 3rd party. Our involvement in the sales process was critical in establishing comfort surrounding numbers and operational processes.

ROI: The carve-out, single entity of the larger business sold for over $1 million in 5 months

After providing accounting and financial support for the company for over two years, a strong sense of trust developed around the financial numbers being right before the sales initiation process began. Our ongoing involvement allowed the sales process to run smoothly due to the detailed reporting process we continued to provide each month. 

The company successfully sold for over $1 million within five months of initial discussion, which was in line with management’s expectations. Our team assisted with the transition of the accounting process to the new company to complete the transaction. The original owner is incredibly pleased with the sale’s outcome and knew this could not have gone as well without our financial partnership and leadership.  

Best Practices for Maximizing your Company’s Value Before Selling

  • Start your exit planning process early, this can be years before you plan to sell
  • Most buyers are risk-averse so be sure your revenue streams are solid and are not too concentrated in one area
  • Get your financial records in order and have the reporting to back it up
    • Do this before starting the sales process to eliminate doubt
    • Do not rely solely on previous tax information, you’ll need more in-depth information and reporting
    • Be sure your business’s accounting practices are GAAP compliant
    • Mistakes will cost you and lower your sale
  • Hire a third party to perform an independent audit and valuation
    • This will uncover risks and areas of opportunity
    • Will highlight key business driving to improve
    • The sooner you do this, the more time you have to make big improvements
  • Work with a business advisor to develop a strategic exit plan