RareBrain Podcasts

A letter of intent (LOI) is sometimes also known as a term sheet or a memorandum of understanding. It generally gives a summary of the key terms of the sale transaction and is almost always non-binding except for confidentiality and an exclusivity period. A letter of intent, essentially allows for the major elements of the transaction to be documented. Do not take the Letter of Intent process lightly; how you negotiate the letter of intent will pretty much set the pace of how the sale transaction goes. In this podcast Gower Idrees, CEO of RareBrain, offers insights into letter of intents in a business sale.

When selling your company, don’t be fooled by the purchase price alone. There is a lot more to it. Look under the hood and look at the total consideration offered for the purchase of your business. Don’t just stop at consideration, you also need to look at transaction structure and the terms & conditions. In this podcast Gower Idrees, CEO of RareBrain, offers insights into purchase price and it’s components in a business sale.

When selling your company, it is best to negotiate many of the serious issues upfront. Some of these issues will need to be negotiated in the letter of intent itself and the rest in a purchase and sale agreement. Beyond price, the top issues include the transaction structure, consideration, terms & conditions and others. In this podcast Gower Idrees, CEO of RareBrain, offers insights into important structural issues when selling your business.

It is very rare that sell-side advisors will discuss “sharing synergies with buyers” with their clients in a business sale transaction. What do we mean? And what are synergies? In the case of strategic corporate acquirers, there are often various types of cost and revenue synergies realized by the buyer. Cost synergies would be something like eliminating redundant expenses, like back office expenses, consolidation of operations and increased purchasing power etc. Revenue synergies would include cross selling opportunities or new entry points in the market. In this podcast Gower Idrees, CEO of RareBrain, offers insights into how to increase the valuation and/or sale price in a business sale leveraging buyer synergies.

Capital Expenditures (CapEx) is essentially all the money spent on fixed assets for your business and/or improving existing fixed assets of your business. So, how is CapEx relevant to the sale valuation of your business? Any smart buyer will be concerned with growth CapEx versus maintenance CapEx. Maintenance CapEx is essentially the on-going capital expenditures for the maintenance of your existing fixed assets, like your equipment. Growth CapEx relates to new capital expenditures which will drive the future growth of the business. In this podcast Gower Idrees, CEO of RareBrain, offers insights into CapEx normalization during a business sale.

Often business owners significantly underestimate due diligence as well as the role of due diligence in the preservation of the purchase price. It is common for due diligence to be very disruptive to the business being bought. Many times there is a negative impact on the operations of the business due to distractions and significant emotional toll on the business owner. Often due diligence can take many months and sometimes can stretch out beyond that. In this podcast Gower Idrees, CEO of RareBrain, offers insights into due diligence during a business sale.

When selling your company, it’s important to lay out all deal aspects to determine the viability of an offer. These include price, consideration, structure, terms & conditions before closing and post-closing obligations. A classic example of this is that smart buyers often demand that a portion of the purchase price be held back or put in an escrow to minimize risk. The holdback escrow is governed by an agreement which has been negotiated between both buyer and seller. In this podcast Gower Idrees, CEO of RareBrain, offers insights into holdbacks and escrows when selling your business.

When selling your business, generally the purchase price is determined as a multiple of the earnings. However, before the transaction actually closes, the seller can manipulate various aspects of the company without any impact to the company’s underlying earnings. In essence, they can impact the purchase price by playing games with the buyers. As a result of this, most savvy buyers demand that there are some safeguards. These safeguards include something called a working capital hurdle. In this episode Gower Idrees, CEO of RareBrain, offers insights into working capital and other adjustments during a business sale.

When it comes to a business sale, outside of price and consideration, the only other main issue is risk. Often, buyers and sellers and their advisors will negotiate and allocate risk between the parties. From a seller’s point of view, they want to be able to walk away with their cash, 100% upfront, with no obligation to the buyer. From the buyer’s perspective, they want to make sure they have some recourse to misrepresentations and/or undisclosed liabilities of the seller. In this podcast, Gower Idrees, CEO of RareBrain Capital, offers insights into risk allocation during a business sale.

Most business owners do their utmost to minimize their taxes. As a result, the tax returns show the lowest amount of tax payable. But this depresses the true earnings of the company. When it comes time to sell the company, the financial statements that are presented to the buyer need to show the real profitability of the company. To make matters worse, many business owners run lifestyle businesses and run a lot of personal expenses through the business. In this podcast Gower Idrees, CEO of RareBrain, offers insights into how to recast your company financials when selling your company to increase sale price.