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If you are planning to sell your small business in the near future, there are a few basic steps you can take to prepare your company for the sale process and which will help save time and headaches down the road and preserve a robust valuation of your company.  Part “clean-up” and part “dressing for success”, based on my experience with numerous mergers and acquisitions of privately-held companies, the following simple steps can give you a head start on the formal deal due diligence process and allow you to present an attractive merger and acquisition candidate to investment bankers and potential buyers.

At the outset, six to twelve months prior to when you are interested in offering your company for sale, meet with your company’s legal counsel and accountants to discuss your goals and seek their advice regarding optimum deal structure, investment banker recommendations and next steps.  Your legal and accounting professionals will then work with you to address the following items:


  • Corporate articles, bylaws, minutes, shareholders’ agreements and similar records for a limited liability company or partnership need to be reviewed by counsel and updated/revised as appropriate so that they are current, complete and compliant with current law.
  • Equity ownership must be clearly recorded in the company records and all stock certificates or units of membership interest properly issued including any restrictive legends.
  • Options need to be reviewed to determine how many are exercisable, by whom and when. An option chart should be prepared.
  • Any questions as to equity ownership need to be resolved at this time and properly documented.
  • All contracts, agreements and leases should be reviewed for limits on assignment.
  • Review all documents pertaining to ownership of assets so title is clear.
  • Have counsel obtain a report of all UCC-1 financing statements of record providing a perfected security interest in company assets. If a secured creditor has not filed a termination statement for a debt which has been paid in full then such creditor should be notified in writing to promptly file the required termination statement.
  • Pending litigation, arbitration and other disputes should be settled as may be appropriate.
  • Employment, non-compete, confidentiality and inventions and IP assignment agreements need to be in place and compiled for reviewed. Typically, some agreement has slipped through the cracks and not previously executed.
  • Personnel files should be reviewed by counsel for compliance and completeness.

Accounting & Tax

  • Audited or reviewed financial statements should be completed as scheduled.
  • Pro forma quarterly financial statements need to be current.
  • Financial projections should be prepared for the next three fiscal years.
  • Contract “pipeline” report should be prepared.
  • File all tax returns, pay all taxes and have complete records of each.
  • Any outstanding tax disputes should be settled.
  • Valuation of the company completed by accountant or other valuation specialist.  It is important for you to have your own valuation to set expectations and help with negotiations, if necessary.