Sun Acquisitions | Chicago Business Broker and M&A Firm

Sun Acquisitions is a Chicago-based business broker and M&A firm. Our team of advisors specialize in buying, selling, and acquiring privately held companies. We can help you sell your business.

Blog Posts

The Importance of Establishing a Succession Plan for Your Family Business

5 Common Mistakes Family Business Owners Make When Selling Their Business

Understanding Valuation: A Beginner’s Guide for Family Business Owners

Fear of Financial Insecurity: Overcoming Concerns About Selling a Business

Fear of Change: Overcoming Hesitation When Selling a Business

Preparing Your Business for Sale: Tips for Streamlining Operations and Boosting Value

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Streamline Business Operations to Improve Business SaleAre you considering selling your business? If so, preparing your company for sale is the best place to start. Streamlining operations and boosting value are critical components of this process. With the proper knowledge, preparation, and execution of these strategies, you stand a better chance of maximizing value and finding the perfect buyer to take over your business.

Regarding streamlining operations, looking at all aspects of your business — from customer service to finance — and evaluating which areas can be improved upon or made more efficient is essential. This could sometimes mean updating outdated systems or processes or hiring new personnel with specialized skills. Doing this will help make running your business easier and make it more attractive as a purchase opportunity for potential buyers.

Preparing Business Finances for Sale

Another way to prepare your business for sale is to clean up the financial statements by a licensed professional that reflects the status of your company’s finances — such as balance sheets, income statements, cash flow statements, etcetera. Another approach involves reviewing customer contracts and adding additional clauses that may benefit a potential buyer regarding revenue streams, change of control provisions or other beneficial terms offered upon acquisition. It may also be worthwhile exploring opportunities for diversifying products/services that would enhance the overall value & appeal of an offering – such moves could even yield additional profit before going up for sale as well.

Manage Expectations When Selling Your Business

Finally, remember the importance of managing expectations throughout negotiations with potential buyers – setting realistic goals & expectations ahead of talks may spare everyone involved from future disappointments & costly hiccups along the way due to misunderstandings between parties involved.

Preparation is essential when it comes time to sell your business. Taking steps like streamlining operations and boosting value can go a long way towards ensuring you are in prime shape before entering into any sale agreements with buyers – this includes providing any legal documents that are in order, too, just in case things ever get litigious down the line. Following these tips should help ensure smooth rides & successful takeovers in the future.

How To Sell Your Business with a PPP Loan

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How to Sell Your Business with a PPP LoanPerhaps you’ve asked, “Can I sell my business if I got a PPP loan?”

The long and short is yes, it’s possible, however, there’s a series of considerations from the Small Business Administration (SBA), the holder of your PPP loan debt that you need to comply with.

In this post, we explore what those terms are and how you can satisfy each one to sell your company.

The Payment Protection Program Loan

At the onset of the coronavirus crisis, the SBA launched its Payment Protection Program Loan in 2020. This relief program was developed to assist business owners.

As can be imagined, selling a business encumbered by a government loan requires you to tread cautiously.

So, the first thing you should do before approaching investors to sell your business is to apply for the Small Business Administration PPP Loan Forgiveness scheme. You want to be free of this debt as soon as possible.

But what exactly does the SBA consider as a change of business ownership? When:

  • At least 20% of the common stock or the ownership interest is sold or transferred;
  • At least 50% of the assets are transferred or sold;
  • Your company is merged with another business.

For the sale to go through and ownership to change, you’ll need SBA approval. Thankfully, there’s official SBA procedural guidance to help navigate business sales involving PPP loans.

The Process of Selling a Business With a PPP Loan

As the PPP borrower, you’re obliged to inform the PPP lender of the planned merger or acquisition in writing. This must be done before the closing or change of ownership is enacted.

To get a sign-off from the PPP lender, you’ll need to furnish the PPP lender with copies proving that:

  • You’ve completely satisfied and completed the loan forgiveness process.
  • The PPP lender has received their funds as stated in the PPP Note from the SBA.
  • You’ve fully paid off any outstanding balance on the PPP loan.

There are four possible pathways you can follow when selling your company:

Pathway #1 Get PPP Loan Forgiveness

The PPP debt you have must be fully forgiven before you’ll be given approval by the SBA to sell the business or change ownership. Alternatively, you can pay an agreed-upon sum – a maximum payable amount – to complete the closing.

Pathway #2 A 50% or Less Stock Sale

If your intended transaction is a stock sale in which you’re selling a maximum of 50% or less of the company, there’s no requirement to notify the SBA. The transaction can go on without interruption.

Pathway #3 A 50% or more Stock/Asset Sale

If you’re intending on selling more than 50% in stock or assets and your PPP loan is unforgiven, you’re required to first obtain loan forgiveness.

To receive forgiveness, the aggregate loan sum including interest must be placed in escrow until the loan forgiveness application has been completed.

Whatever has been forgiven can be remitted to you and what wasn’t forgiven will be deducted from the escrow account. This escrow fund is controlled by the SBA lender and they’ll have direct access to the money during the processing of your loan forgiveness.

Pathway #4 SBA Lender Intervention

What happens in the case where you don’t have enough funds to place into an escrow account? In this case, you must engage with the SBA for ownership transfer approval.

A letter explaining your situation regarding why you cannot escrow the funds needed to fulfill the PPP loan must be sent to the SBA lender who will forward it to their SBA Loan Servicing Center.

You’ll be asked to provide them with copies of

  • The PPP Loan
  • The PPP Note
  • The Sale Agreement

NB: You must also disclose the following:

  • Whether or not the potential buyer is also on a government relief program or has a PPP loan and,
  • The names of stakeholders with a 20% stake in the entity purchasing your business.

Engage a Business Broker to Ease the Selling Process

Getting a business ready to present to investors requires the assistance of experienced brokers who will help you gather and prepare financial documents, conduct business valuation, and screen and qualify buyers.

If you’re thinking of selling your business, contact us  at Sun Acquisitions. Let’s help you get the best returns on your investment.

Looking for more insight on selling a business? Check out these links:

Disclaimer: Any information provided in this blog is not intended to replace legal, financial, or taxation advice given by qualified professionals.

How to Sell Business Equity

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How to Sell Business EquityShould you sell business goodwill?

If it makes financial sense and you understand the dilution aspect of selling equity and the potential interference from investors, then yes, go ahead. It’s a common enough practice.

People sell business ownership for a variety of reasons:

  • Needing capital to actually start the company;
  • Swapping equity for additional capital to grow the business;
  • Sourcing money to pay down existing liabilities and debts;
  • Raising venture capital to expand into new markets and;
  • Desiring to diversify their own business risk as the sole owner.

Whatever your motives for giving up part ownership in your company, there are things M&A brokers want you to be aware of.

In this post, we’re going to address what these are, some of the challenges to expect, how to sell the equity, and who to sell it to. But first, here’s a look at the pros and cons of the practice.

Selling equity – the good, the bad, the ugly

One of the biggest advantages of raising capital via the selling of equity is that, unlike debt, the business owner isn’t weighed down with payback quotas and inflated interest rates. Another favorable argument for giving up equity is that again unlike debt, the money received isn’t secured by business assets.

However, with that said, most of today’s investors aren’t content with just being silent partners. They do expect to be involved in the daily operations. Some will even contest for equal standing with you and negotiate board positions where they have the power to vote.

If you enjoy being a solo entrepreneur, then selling business equity may not be the right path for you. That’s mainly to do with the fact that your equity partners are your business co-owners. What does this mean practically?

With this background in mind, who should you sell equity to?

Who to sell your business equity to

When it comes to selling business equity you need to keep two things in mind:

Who you’re selling to and how much equity you’re prepared to give up.

Equity partners can be family members, startup colleagues, venture capitalists, or angel investors.

It’s worth mentioning that selling equity doesn’t necessarily entail receiving capital investment. It can also mean the investment of time and skills.

A good case study of why it’s essential to be mindful of who you sell to and the equity you give up can be seen in the following story:

In 2006 Greg Alexander founded Sales Benchmark Index (SBI) a growth advisory firm. He gave two of his employees a 25% stake each in the company. Fast forward 10 years, the business was worth $162 million. However, because of his disastrously generous equity offer at the onset, his two employees walked away with nearly half the money – a cool $80 million – when the company was eventually sold to New York-based private equity firm CIP Capital.

The point of the story is to be careful who you sell to and how much equity you give away.

This brings us to the next issue – the process of selling business goodwill.

How to sell your business equity

First things first, you’ve got to get the business up to a respectable state. Fix whatever needs fixing before presenting your business to investors. For example, get your financial records in order and have a business valuation done through an independent consultant.

An experienced broker is able to facilitate the preparation needed and position your business as an attractive investment.

Furthermore, a broker will be able to help you solicit interest from various avenues. Ultimately you’ll likely be opting for one of the following:

  • Going public with your sale through a public listing (an expensive and highly demanding process but whose tradeoff is the ability to raise colossal amounts of capital)
  • Peddling to big private investors (enter venture capitalists and angel investors)
  • Selling to lesser-known investors (private business owners you may know already)
  • Selling within to employees (an excellent way to boost employee loyalty)

If you’re interested in selling business goodwill, it’s always a good idea to consult with a seasoned broker. Here at Sun Acquisitions, our team is ready to help you map a way forward.

Looking for more insight on selling a business? Check out these links:

Disclaimer: Any information provided in this blog is not intended to replace legal, financial, or taxation advice given by qualified professionals.

 

 

 

Selling a Business During Lawsuit

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Can you sell a business during a lawsuit?

Can you sell your business during a lawsuit?

While it is certainly not impossible, it’s going to be an uphill battle trying to convince your buyers otherwise.

In this post, we take a look at the issues you need to address if you’re facing litigation but are still intent on going ahead with the sale.

Issue #1 Disclosure of litigation details to your buyers

You have an implied obligation as a seller to inform buyers of any lawsuits.

Perhaps you the business owner have been implicated in a filing and you’re personally named in the lawsuit but the company name is not.

Or, it may happen that you and the business are both implicated in the claim.

Regardless of which of these two lawsuits you’re facing, it’s imperative to tell potential buyers about it. Failure to disclose the fact that you’re being sued can lead to a secondary lawsuit post-closing from the buyer for misrepresentation.

Issue #2 Anticipation of a lower price offering

It can sometimes happen that you’re hit with a lawsuit after you’ve completed a business valuation. This is incredibly inconvenient because, following valuation, most owners will have already worked out a reasonably just price for the business.

Unfortunately, an existing legal problem will give investors leverage to drive down the price. It is advisable to settle the lawsuit first and then try selling your business again after some time has passed.

But if you’re pressed because you’re ready to retire immediately, or suffer from chronic health problems, or can’t envision working anymore, you may have to take the lower offer on the table.

Issue #3 Be aware of your seller’s responsibilities

If you want a smoother selling experience, it’s key to be aware of your responsibilities as a seller.

Some of your responsibilities involve acting in good faith with your buyer, being truthful, and being fair. Responsibilities also cover the preparation of company documents and transactional records – including any and all previous legal history. If you’ve had any interaction with the government, this too must be disclosed to the buyer.

A professional M&A broker can assist you with your preparations to sell. A working relationship with such a business broker, especially if there is a legal impediment is a great way to manage risk during the transaction.

Issue #4 Where does buyer due diligence fit in?

Every buyer should conduct due diligence on the business they’re interested in. Nothing should ever be taken at face value – even if you implicitly trust the seller.

In fact, due diligence is part of a buyer’s responsibilities, and failure to fulfill this mandate can be disastrous for the buyer. As a seller, one of the reasons you should also always be upfront with any pending lawsuits is because a diligent buyer will unearth everything you’re trying to hide.

As can be imagined, the fact that you omitted to inform the buyer of such a critical piece of information can quickly sour the relationship.

Issue #5 Factor associated damages to the business

A lawsuit can do all kinds of damage to a business. From affecting your bottom line to tarnishing your brand reputation. Other downsides of litigation are:

  • Lower sales
  • A decrease in company value
  • A negative perception by industry peers

As a company, you’re a legal entity that can be sued – and sued for a variety of reasons:

  • Misrepresentation
  • Contract disputes
  • Patent infringement
  • Property liability
  • Employee matters

You need to be realistic about the lawsuit you’re facing and tackle it head-on. Lawsuits, depending on what’s caused them can even bankrupt the business before you’ve even received any offers! Hence the necessity to have good counsel as you get ready to sell.

Surround yourself with the right team

So, to answer the question we asked at the beginning, can you sell your business during a lawsuit?

Yes.

Seasoned brokers like the team here at Sun Acquisitions can help you with a business valuation, document preparation, qualifying buyers, and negotiating an asking price.

You’ll also need M&A attorneys and accountants. Fortunately, we have cultivated a rich network and can thus make suitable recommendations.

For those in Chicago eager to get started our Sun Acquisitions brokers are ready to help. Contact us today.

Looking for more insight on selling a business? Check out these links:

Disclaimer: Any information provided in this blog is not intended to replace legal, financial, or taxation advice given by qualified professionals.

How to Sell a Business Discreetly

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Are you a business owner wondering how to sell a business without anyone knowing?

There are a plethora of reasons you may wish to sell your business discreetly. As seasoned M&A experts, we understand.

We know the prevalence of unethical practices carried out by unscrupulous competitors who feign interest in the hopes of acquiring trade secrets.  We’re also aware that some employees are considered redundant and end up retrenched.  This is more than enough incentive to seek out a discreet sale.

But just how do you go about arranging a circumspect deal? Let’s find out.

The Case for Choosing a Suitable Market

The type of market you choose to take your business to does influence the level of discretion you can anticipate during the sale.

Now, what exactly is a market? Simply put, “market” refers to the different groups interested in your business or potential acquirers. There are three conventional markets and each has its pros and cons.

We’re going to take a look at these markets below.

And, for those pondering how to sell a business without staff knowing, it’s going to become quickly apparent that the first two markets fit their desire for a quiet sale.

Market A – Proprietary Deal

Potential buyer: 1

When only one acquirer is in the picture it’s very easy to keep things under wraps. It also means you only have to focus on dealing with a single entity as opposed to a handful of interested parties.

This is a dream situation for most buyers, giving them leeway to negotiate terms and conditions to their liking.

The major disadvantage to this setup is the leverage acquirers are furnished with. This can be abused to drive the cost of the business down at the same time while drawing out the sale over months in order to hopefully frustrate the seller.

Market B – The Dirty Dozen

Potential Buyers: 6 – 12

The majority of sellers do not like the idea of putting all their eggs in one basket as is the case with Market A but prefer instead to have at least a dozen natural acquirers to pit against each other.

With the help of a well-connected M&A broker, you can come up with a short list of likely buyers for your business that include your current partners and or industry rivals.

What’s neat about having a “Dirty Dozen” shortlist is that the people or businesses on the list tend to be people already in your circle. Folks who are familiar with the business. This is a pro because it means the sale can be expedited.

Great care must be exercised here if you’re going to invite competitors to the table. Remember, the more people who are aware of the sale, the harder it will be to keep the transaction secret for long.

Market C – The Fish Market

Potential Buyers: 100 – 300

It goes without saying that pushing your business before this market greatly magnifies the chances of the sale leaking to employees, vendors, and others you don’t wish to know. However, a bigger group can translate to better offers and faster closing times.

What are the downsides?

The most glaring one is the expense and time involved in trying to screen potential buyers.

The way most people work this market discreetly is by sending out an anonymous letter that gives an in-depth dive into the business. This introductory letter is devoid of all traces that can be used to identify the company. It may feature proxy phone numbers and email addresses for initial communication.

Those who express interest are then made to sign a Non-Disclosure Agreement (NDA) before more can be divulged. With the NDA signed you can then hand over the company memorandum.

Phone calls are typically arranged for those who’re really keen to keep pursuing the deal until face-to-face meetings are had. It’s around this time that offers are made, discussed, rejected, or accepted.

An attempt at closing a sale privately with a buyer from Market C is not impossible but the chances of news leaking are higher than with the first two markets.

Get Expert Help

Sun Acquisitions prides itself on providing sellers with a seasoned M&A team ready to assist, offer counsel, and advice about how to sell a business without anyone knowing.

To learn more contact us today.

Looking for more insight on selling a business? Check out these links:

Disclaimer: Any information provided in this blog is not intended to replace legal, financial, or taxation advice given by qualified professionals.

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