Richard G. Stieglitz - Expensive mistakes when buying & selling companies: ... and how to avoid them in your deals

If you plan to buy or sell a privately-held business, this book could be worth millions of dollars to you!

EXPENSIVE MISTAKES

BUSINESS OWNERS MAKE IN BUYING AND

SELLING COMPANIES

And How to Avoid

Them in Your Deals

Richard G. Stieglitz, PhD

and

Stuart H. Sorkin, JD, LL.M, CPA

PUT MORE MONEY IN YOUR POCKET!

Buying or selling a business can be a lucrative but risky transaction its all too easy to sell yourself short or to overpay as a buyer. If you want to avoid the costly mistakes that many business owners make in buying and selling privately-held companies, this book is for you! It provides valuable guidance on how to negotiate your deal, and how to walk away from the table with more money in your pocket.

A popular maxim says that average people learn from their own mistakes, stupid people repeat their mistakes, and brilliant people learn from the mistakes and successes of other. This book is designed to nudge you toward the brilliant category among business owners who buy and sell privately-held companies. Even if you hire a seasoned team of M&A professionals to guide you (highly recommended) through your deal, the insights in this book could be worth millions of dollars to you!

The owners of most businesses buy or sell a company once in their lifetime. However, on the other side of the table in the transaction may be an unscrupulous or unsophisticated buyer/seller. This book will help you even the odds by giving you the knowledge to sidestep the pitfalls of M&A transactions.

Too many business owners get caught in the day-to-day minutia of managing their company and have few options when the opportunity comes to buy another company or to sell theirs. Most dont realize that it often takes two years or longer to prepare a company to be sold, and about a year to get ready to buy a company. Furthermore, its likely to take six to nine months more to close the deal. This book will help you shorten the time - and get it right the first time!

Copyright 2010 by Richard G. Stieglitz, PHD and Stuart Sorkin, JD, LL.M, CPA

All rights reserved, including the right to reproduce this book or portions thereof in any form or by any means, electronic or mechanical, including photocopying, recording, or by information storage and retrieval system, without permission in writing from the publisher.

Acuity Publishing

9812 Falls Road #114-157

Potomac, Maryland 20854- 3863

301-365-9031, Fax:301-365-9041

Info@AcuityPublishing.Com

Disclaimer

This publication is designed to educate and provide general information regarding the subject matter covered. The reader is encouraged to consult with his or her own advisors regarding specific situations. While the authors have taken reasonable precautions in the preparation of this book and believe the facts presented within the book are accurate, neither the publisher nor the authors assume any responsibility for errors or omissions. The authors and publishers specifically disclaim any liability resulting from the use or application of the information contained in this book. This book was written to introduce business owners to the motivations, complexities, and processes involved in buying or selling a privately-held business. The book is not a substitute for competent strategic, legal, and financial advisors for those who are contemplating, planning, or executing an acquisition or sale transaction.

Publishers Cataloging-In-Publication

Stieglitz, Richard G.

HD1393.25 .S75 2010 2009939983

658.16--dc22 1001

Printed in the United States of America.

Cover and book design: Patricia Bacall

This book is dedicated to entrepreneurs who have

taken the plunge to start their own privately-held

businesses. We admire the courage, the creativity,

and the dedication it takes to achieve success.

Other Books

By Dick Stieglitz

On Changes in the World of Business :

Taming the Dragons of Change in Business

How to Thrive, Not Just Survive, in

a Rapidly Changing Global Economy

On Personal Change :

Taming The Dragons of Change

10 Tips For Achieving Happiness & Success

When Everything Around You Is Changing

Table of Contents

FOREWORD

By Jeff Copeland, CEO, immixGroup Inc.

Mergers and acquisitions (M&A) are an emotional roller coaster for anyone who hasnt navigated the process several times. The process consumes an enormous amount of executive time. Even for a professionally-managed and well-financed company, the best-planned acquisitions can be costly and stretch critical resources. The more you know about the M&A process - its costs and its benefits - the more likely you are to have a successful transaction.

If you are contemplating an M&A transaction, whether as a buyer or a seller, it can take a year or longer to prepare a company to be sold or to find a good acquisition candidate. If you havent been preparing for such a transaction in advance, you probably will not be ready to pursue the perfect acquisition target when it hits the market, or to walk away with top dollar when a buyer with deep pockets expresses a strong interest in your company.

I wish I had known more about M&A transactions before my companys first few acquisitions. I learned about M&A the hard way: through trial and error. If I knew then what I now know after living through some difficult learning experiences, Im confident our acquisitions would have been less costly and more efficient. I certainly would have lost less sleep worrying that I was paying too much, that the deal was going to fall apart, or that it was just the wrong thing to do from a strategic or tactical perspective. Fortunately, most of the transactions have worked out very well for my company and for me.

To substantially improve the odds of making a successful acquisition, an entrepreneur needs the counsel of professionals who have years of experience and the hard-won knowledge gained from numerous transactions. You may be a successful entrepreneur who runs a very profitable business. This does not mean, however, that you have the expertise required to determine the right criteria to locate the best acquisition targets. It does not guarantee that you will know how to negotiate and close the deal, or how to best merge a new companys business and personnel into your current operations and culture. These issues require a set of skills and experience that you and your management team may not currently possess.

For these reasons, adding experts like Stuart and Dick to your team is the most effective way to prepare for and complete a successful acquisition. They were critical to our process. They developed alternative deal structures and helped us decide which to implement. They knew how to determine the value of a target, negotiate a fair price, and arrange financing. They provided post-closing advice on merging operations to extract the highest value.

Stuart and Dick understood the pitfalls. They helped us avoid costly mistakes, and led me through the process of making the right decisions. In one instance, this meant the best decision was walking away from what would have likely become a bad acquisition.

This book is a valuable resource - and a fascinating read - for anyone who owns a business, plans to sell or buy a business, or is a professional (such as a lawyer, broker, or accountant) who advises buyers and sellers. After reading this book, you will see that M&A deals are as much art as science, and you will know what to expect and what not to expect. That knowledge alone will improve the odds that your M&A transaction will close, meet your expectations, and produce profitable results.