Armando (0:00 – 1:46)
Hello founder, you’ve built a successful business and now it’s time to think about that once-in-a-lifetime exit from your business. You’ve come to the right place. Here you will hear business exit professionals involved in the buying and selling of companies talk about what you should know before you exit.
If you’ve never sold a business before, this podcast can be super helpful to you. I’m Armando, host of the founder’s guidepost. Enjoy.
If you like this information, please subscribe and share. Today, we’re going to talk a little bit about things that are relevant conversations that you have with your clients. You are, of course, an attorney, a shareholder with Polsenilli.
You’ve got a CPA, a master’s in tax, a CFA. You’ve got a whole tax component that most attorneys who do what you do, they just don’t have. And that’s part of why I’m excited to have the conversation with you because you’ve got a different perspective and taxes, especially in that once-in-a-lifetime sale can be just incredible.
Let’s have a conversation about that. You are a merger and acquisition attorney and you help people with that exit. What is it that you hear from your clientele that maybe are some of the surprises for them when they’re having that first conversation with you?
Phil (1:47 – 4:18)
First of all, Armando, it’s my pleasure to be here with you. I appreciate you having me on your podcast. Certainly.
Glad to have you here. Yeah. I’m an attorney.
I’ve practiced 28 years now. I also have a tax and accounting background, which I’m not a practicing accountant, but I use that background and expertise when I’m helping sellers and buyers of businesses and people engaging in M&A transactions. I know we’re focusing on the sell side, so that’s what I’ll talk about mostly today.
For sellers, the first thing is, it’s a Stephen Covey principle, start with the end in mind. I ask them, what are your goals after the end of the transaction? Where do you want to be?
Most business owners, most sellers have a few key goals. They want to take care of their family. They want to know that they’re set for life once they’ve sold this company, that they’re going to be able to keep the proceeds, whatever their company’s worth, and they sell it for the net amount they can keep.
They want to protect it. We’ll talk about some ways to protect it and how an M&A lawyer works with the state planning lawyers to make sure that once that deal closes, the net cash or proceeds from the sale are protected. Most sellers also want to protect their workers because their key employees and lower level employees, they all help that entrepreneur and that owner get to where they are, and they want to make sure that that team is taken care of.
Part of that process is conducting diligence on the buyer, like how’s the buyer, what’s their reputation, how are they going to treat the workers, what have they told the seller about their culture, about how the company’s going to fit in if it’s a private equity fund that has existing portfolio companies that this business is going to be added to. You have an opportunity, the seller has an opportunity to conduct what we call reverse due diligence, so you can get the financials on the buyer, ask to interview the president or the owners of companies that they’ve already acquired to see how did it go, how they treated them post-closing. And you generally, if you do that, you want to not just get and talk to the list of buyers or list of companies that the buyer provided, you want to say, give me the entire list of everyone you’ve acquired and kind of do your own audit, pick and choose and say, I’d like to talk to that one, skip down, I’ll talk to that one.
That way you’re not going to get a bias where the buyer is just going to send the companies or the people that are happy. If there’s someone that’s not happy, you may be able to just talk to them and find out, well, what didn’t go right? What would you have done differently?
And that’s a valuable conversation to have.
Armando (4:19 – 5:00)
Yeah. And it seems like, Phil, that sometimes a seller, an owner of a business who’s had an attorney along the way and having that attorney help them with different things, they might think that that attorney might be the go-to attorney for them when they’re going through the sale without realizing that the buying and selling of companies is really an expertise within the legal space. Do you find that with some of your clients that they just don’t understand that this is an expertise, a skill set that you have, but maybe that normal day-to-day attorney they’ve had along the way might not be the right person to help them navigate the sale?
Phil (5:01 – 8:15)
Yeah, we see that a lot. A company may have gotten started by using a relative or just a corporate or generalist attorney, but an M&A transaction, it’s a specialized transaction. I tell sellers that it’s an industry in and of itself.
You have bankers, you have investment bankers, you have accountants, you have attorneys, you have different types of buyers. There’s a standard way of doing deals. And if you have an attorney who doesn’t know what market terms are, you can end up with a seller represented by an attorney who just doesn’t know what a good deal is and doesn’t know what market parameters are.
And in that case, you might end up with a seller who gets a bad deal or might have part of the purchase price clawed back where they otherwise would not see that happening. It’s gotten even more specialized in the past five years or so. And that’s because deals of any size, 20 million or more in purchase price are these days often covered by representation and warranty insurance.
And depending on how competitive the process is for a company, sellers can often negotiate to have the bidder, the winning buyer pay for that insurance premium. So there’s insurance companies that will basically take the risk that there’s a breach or a miss on a representation and warranty that the seller is going to make. So instead of clawing back a portion of the purchase price, they go to that insurance company and get made a hold from the insurance company.
And that can allow a better outcome. And I’ll give you an example. A company sells for a hundred million, there might be a $10 million escrow without rep and warranty insurance.
And that’s where 10 million of that price goes into a separate escrow account and is held for a year, sometimes two years, and is available to the buyer to recover from if something the seller told the buyer about the business turns out not to be true. There’s a lawsuit that comes up from a pre-closing time period. There’s a environmental claim.
There’s something that happens. Some of those or most of those issues can be insured and the risk is basically shift up to the insurance company, which allows, instead of escrowing 10 million, you might escrow half a percent, 500,000, or sometimes none. If there’s a competitive process where an investment banker, they definitely can earn their fee.
They can get buyers bidding against each other. And if a buyer really wants a deal, they can make part of their offer. Hey, we’ll buy the rep and warranty insurance policy.
We’re not going to require you to bear any of the retention. We’ll bear the 1% retention that that policy usually requires. And that makes that offer a lot more attractive.
It ends up allowing private company sellers to get terms that are similar to public company M&A. With a public company deal, reps and warranties don’t survive closing. And basically it’s the diligence and the buyer has to do other diligence upfront because you’re not going to be able to recover from the public shareholders when you buy a public company.
That benefit and those kind of deal structures are now shifted to private companies with the use of representation and warranty insurance.
Armando (8:16 – 8:44)
Okay. And so Phil, let’s take a step back just for a second. So somebody who’s had a company say for 30 years and they’re getting phone calls and they got a phone call from a prospective buyer that sounds pretty attractive.
It sounds really attractive. And they’re coming to you for the first time. When you’re talking with them about the sale, can you paint the big picture of how that works and how you help them navigate that whole process?
I guess from the big picture perspective.
Phil (8:45 – 13:08)
Yeah. There’s two pieces to that question. The first is, what do we do as M&A lawyers before a letter of intent is signed?
Before a company owner, a seller has picked who they want to sell to? And then what happens after the LOI is signed? So I’ll cover the first part first.
What I typically like to do is talk to the seller, find out, have you done your estate planning? Do you have your company owned in your own name? Is it owned in a revocable or an irrevocable trust, like a gift trust?
And if they haven’t done that, I’ll bring in one of our estate planning colleagues at Polsenilli to talk to them about spousal lifetime access trust, BDIT. So that’s a trust that gets set up for the owner where they can actually sell assets, sell part of their company to that trust. And the trust is for the owner’s benefit instead of a spouse or someone else.
They may want to put some of the company in a gift trust for children or a dynasty trust that can go on, say, 500 years and benefit the lineal descendants of that entrepreneur for a very long period of time. That kind of planning, if an entrepreneur has never done that, that opens their eyes to a lot of opportunities and a lot of options. And if they actually have six months or so before a deal is going to close to do that planning, they can often transfer their entire business into asset protected trust that once the business is sold and that cash gets paid, it’s sheltered from the estate tax.
It can be sheltered from creditors. It can be sheltered from future creditors of beneficiaries like children or ex-spouses or whoever. And that money can then be invested by people like you, Armando, to make sure that it grows and is preserved and provides income and can pay for college educations and whatnot.
That’s part of leaving a legacy that any entrepreneur who’s got any company of significance really should be thinking about. And they’ll be appreciative of the different options that estate planners can provide. And once that structure is set up and they sell the company, now they’ve got a pool of money in a protected vehicle.
A lot of entrepreneurs are not going to stop at one company. They’re going to start another company or they’re going to invest in real estate or they’re going to do something else with some of their proceeds. They can do it under that trust structure.
So then whatever they’re building up doesn’t become subject to the estate tax. And right now, I’m not an estate planning lawyer, but I’m familiar with the exemptions. We can shelter, each person can shelter just under 13 million from the estate tax upon death.
But that law sunsets and it goes back down to 5 million adjusted for inflation in 2026. So you lose over half your exemption amount. The inflation adjustment should put it around 6 million.
So it goes down by more than half. And entrepreneurs can build a company well above that number. So it’s important to try to take advantage of the higher exemption now, which you can do if you do planning and make gifts that use up that exemption.
It doesn’t trigger any actual tax or payment, but you can move with a husband and wife. They can move over almost 26 million, over 25 million into asset protected trust for themselves and for their children and grandchildren and so on. And then if we structure the company so they’re transferring say non-voting equity, you can get on valuing what’s being transferred or sold to those trusts.
You can get discounts. So discounts range between 30 and 40 percent. So let’s say you were maximized your discount and it’s discounted by 40 percent.
You might be able to move like 35 million into those trusts. And that there’s all kinds of advanced planning that the estate planners will talk about with grant or trust where the trust doesn’t pay tax. The entrepreneur pays the income tax on that trust.
So when the company sells, if there’s assets that remain outside of those trusts, those assets can be used to pay the tax. So you’re kind of creating like a quasi Roth IRA where the trust never pays tax, income taxes, and it’s exempt from the estate tax. So when owners hear those kind of options and hear what can be done, they get excited about it.
And most of them want to implement some version of that. They might not want to go all the way, but usually there’s something that should be done before the sale occurs.
Armando (13:09 – 14:01)
Yeah. And Phil, I’m so glad you’re talking about that because what you just did, you opened up a whole nother realm outside of the sale of the business. What you talked about can be extremely impactful to a family, to the owners of that business when they’re selling.
But if they don’t talk with you soon enough and the deal has to close in 60 days, you might not have time to help them understand and go through that process. But the planning ahead of time can be extremely impactful on that family, on those owners. As you said, setting up some kind of a trust, maybe a dynasty trust that can last for 500 years and how many generations of that family and the impact they could have on the community at large when they want to.
But all those options go off the table if they don’t talk with you early in the process.
Phil (14:02 – 14:54)
They don’t go off the table. It’s just more costly to do it because you’re now using after-tax money to do it and it’s harder to get discounts on cash. You’d have to put cash and invest it and then claim the discounts are going to be lower if you’re transferring assets to trusts that are cash or entities like limited liability companies that hold cash.
When you transfer an operating business, that’s where a valuation expert can apply significant discounts because you’re applying a discount for lack of marketability and lack of control. So the trust, if you give 10 million, if you were to sell the company and liquidate, you can give 10 million worth of assets for estate and gift tax purposes that might only be valued at 6 million. So you can get more into those trusts.
So that’s part of the overall pre-planning. You can do a lot more. It’s not impossible to do after the sale.
It’s just not as advantageous.
Armando (14:54 – 15:09)
Well, right. And you said using after-tax dollars versus pre-tax dollars, that can be significant, extremely significant. How far along, if somebody wants to sell their business in two years, for example, 24 months, at what point should they talk with you?
Phil (15:11 – 18:53)
Immediately. So I like to get in two or three years before a company is going to go to market and sell, not only to work with the estate planning lawyers to do pre-planning if the client or the seller is interested, but also to help them get the company ready to sell. There’s pre-sale diligence and pre-sale preparation that M&A lawyers like me can help a company do.
And the way that works is I’ll take a company through a typical 15 to 20 page due diligence request list that we’ll get from the ultimate buyer. We use those lists when I’m representing buyers of companies. So we do transactions on both sides for buyers and sellers.
So I’ll use a request list that’s in that industry that focuses on what that company does. If they have FDA regulated products, there’ll be a whole section on FDA compliance and similar type of regulated businesses. And what we do is we set up a secure virtual data room, which is online like Dropbox service.
It’s a lot better than Dropbox in that it’s secure. You can watermark documents. You can track who downloads what.
So you can see who’s downloading what information from the data room. So when we open that data room up and give a potential buyer or bidder access to it, we’re going to see how many people they put in there. We’re going to see what they’re focusing on.
We’re going to be able to control and turn off access if we decide that we’re going to cut them off and not sell to that company. So if I have a little bit of time before a sale, we’ll set up a data room. We’ll organize it based on a typical due diligence request list.
And then I’ll work with the entrepreneur or the seller to populate that with their corporate documents, their LLC documents, tax returns, financial statements, employment-related contracts, employment policies, intellectual property. Do they have any patents or trademarks? We’ll get all that stuff uploaded.
Have they received documents assigning inventions by employees or assigning any kind of copyrights, trademarks, patentable devices or inventions that an employee or a contractor has come up with for the company and been paid for? That should all be owned by the company. And going through a diligence process or pre-sale diligence can help identify gaps.
So if we know that, okay, we paid this contractor to develop some software and we don’t have an assignment of the rights to that software, we can go to that contractor and get that now to a year or two ahead of time. It’s a lot easier to do that than on the eve of a sale, because if they suspect that the company’s for sale or they’re trying to button that up, they could try to extort money or get some additional payment out of the company at that time, rather than you have a good period of time to work on it. And maybe that developer is going to be paid some money to do an update or something.
You can use that as an opportunity to get that assignment in place to make sure that the company owns its assets. And these days, most companies, their largest assets are not hard assets like property, plant, equipment. It’s intangibles.
Look at Salesforce. A lot of their assets don’t show up on their balance sheet. It’s just self-created goodwill.
It’s software. It’s a lot of the expense in developing these intangible SaaS company that has an online product. That’s going to be expense.
So it’s not going to show up anywhere on the asset side of the balance sheet. That’s all intangibles and it’s off balance sheet assets. All of those are protected and a buyer is going to look at, well, do you own your SaaS product?
Do you own the code? Have you protected it with trade secret covenants that your employees and contractors have signed? And if the answer is no, that stuff, as a lawyer for a potential seller, we can get that buttoned up and locked down early on.
And it’s much easier to do it a year or two ahead of time.
Armando (18:54 – 19:28)
Yeah. And it sounds like a lot of things along the way that as businesses grow, they evolve, they get new people, new processes, et cetera. You can see how along the way they might not think about getting that written agreement or that contract or get that assignment.
So when the buyer comes along and wants to see all that in a nice, neat, organized fashion, so that they know what they’re actually buying, it sounds like it could negatively impact the sales price or reduce that sales price or reduce maybe some conditions in the sale that really the buyer wants to have in there.
Phil (19:29 – 21:12)
That’s exactly right. So once you sign a letter of intent with a buyer, there’ll be some certain binding provisions. Most of it’s not binding where you don’t have to sell to the buyer so you could back out.
There’ll be a exclusivity period where you agree not to talk to any other potential buyers and exclusively engage and negotiate with the winning company that won the bid if it was a competitive auction process or whatever buyer you picked. They’re going to conduct a diligence process during that exclusivity period, which is 60 days, it could be 90 days, and they’re going to be looking for reasons to drive the price down. They’ve got you on the hook.
The seller’s mentally committed to selling to this company. They’re already spending the money in their mind that they’re going to receive at closing. A buyer, they’re going to do a quality of earnings.
That’s a process where they’ll hire their own accounting firm to do basically a mini audit on the financial statements and the the companies provided. They’re going to look for where are their one-time income amounts that they’re going to take out. Are the earnings that have been reported real earnings that are going to come over with the business?
They’re going to look for any way to get that number down so they can potentially retrade the purchase price they’ve offered. One of the provisions that I’ll negotiate into a letter of intent is to say that in the event the buyer reduces or offers a lower purchase price than what’s stated in the letter of intent, the exclusivity goes away. That gives the seller the ability to go back to market and talk to other potential buyers while they’re still negotiating with this buyer.
Let’s then reduce the purchase price. That’s a good incentive for that potential buyer not to retrade or try to push down the purchase price.
Armando (21:12 – 21:28)
That letter of intent that you talked about, before it gets signed, it’s ideal when you’re engaged before they even sign anything so that you can put provisions in there to help safeguard and protect the seller.
Phil (21:29 – 21:47)
That’s correct. When I’m on the sell side, we want the letter of intent to be as detailed as possible. We want to state we expect you to purchase rep and warranty insurance.
We’re going to specify how long the representations and warranties survive, what are fundamental reps and what are non-fundamental reps.
Armando (21:47 – 22:06)
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Phil (22:07 – 22:57)
These are all terms of art that any M&A lawyer is familiar with and that investment bankers are familiar with. The more detail we get in the letter of intent for the seller, the less likely it is to have some retrade later. We know whether the buyer is going to stick within market terms.
There are services out there like SRS Aqueum, the American Bar Association that publishes annually deal point studies where you can look at a deal size. Sometimes it gets industry-specific and you can look at how are deals being closed in this size range? What’s market?
What’s not market? We’ll make sure that the letter of intent is within market range, preferably seller favorable end of the market range. Then we’ll get a real sense of, is this buyer serious about buying the company and not trying to cram a bad deal down a seller’s neck?
Armando (22:57 – 23:03)
Now, Phil, you used the term retrade a couple of times. What does retrade mean?
Phil (23:05 – 23:29)
Basically, it means renegading. It’s changing the deal terms that were initially offered. That could happen because diligence shows there’s some big issue that comes up or the quality of earnings or some analysis the buyer does shows that the earnings aren’t real or they’re not going to recur at the same rate or the growth rate that a seller or the investment banker has put in the assumptions or the pro forma financials is not going to be realized.
Armando (23:30 – 23:33)
It sounds like retrade is never a positive thing for the seller.
Phil (23:33 – 23:34)
Correct.
Armando (23:34 – 23:48)
Okay. Seller does not want to retrade. When you help them and get the LOI drafted, you’re putting provisions in there to reduce the risk of the buyer trying some kind of a retrade.
Phil (23:50 – 24:56)
Absolutely. Having a good investment banker on board can help with that. Investment bankers, their job is to get multiple buyers bidding for a company.
They’re bidding against each other and if you accept the best offer, it might not be the highest price because you might go with a company that you know is going to treat your workforce the way you want. It might not be the maximum amount of money, but the seller might be confident that this company has a good reputation. Maybe you’ve worked with them in the industry or you just know them or your diligence shows that people love working for this particular buyer.
It gives you an option when you say to other bidders, we picked someone else, but we’ll let you know if it falls through. You can always go back to them and say, hey, it didn’t work out. The investment banker knows how to spin that.
They know how to basically approach bidders who didn’t win the bid and then restart the process. Hopefully that doesn’t happen. Hopefully the fact that there are other bidders out there keeps the buyer you’ve selected honest and prevents them from driving down the purchase price or insisting on unreasonable terms.
Armando (24:57 – 25:22)
Phil, you mentioned the LOI. Before they sign that, talk with you so you can put provisions that help them. What about the investment banker?
There’s an agreement that the investment banker wants to get signed as well so that when the seller hires the investment banker, there’s an agreement that is signed. Is it beneficial to that seller also to talk with you before they sign that or maybe before they hire that particular investment banker?
Phil (25:23 – 28:53)
Definitely. It’s a contract. When you engage an investment banker, you’re entering a contract with that banker.
That contract will typically have a fee called a success fee that basically has the company, the owners paying the investment banker a percentage of the sale price, whatever the company is sold for. Depending on the size, if it’s a smaller deal, that percentage is going to be higher. As the deal gets bigger, the percentage should go down because the amount of work the banker does for a $50 million deal is not much different than a $100 million deal or even a $200 or $500 million deal.
There’s a sliding scale typically as the deal size goes up where the fee will go down. It’s super important to have a M&A lawyer review that engagement letter or engagement agreement before the seller or the entrepreneur signs it to make sure that you include provisions and the seller has provisions in there to protect the company. Not every investment banker works out.
Sometimes there’s a personality conflict that arises as the process goes forward. Sometimes the sale process doesn’t work out and you might want to be able to move on and terminate that engagement and hire a different investment banker or sit still for a while, regroup, and then go back to market and use a different banker. So having termination provisions that make sense is important.
I’ve seen investment banker engagement letters that say, if you sell the company within two years after this engagement terminates, it doesn’t matter who you sell to, you still have to pay us a fee, even if that banker didn’t find the buyer. That’s a ridiculous term that should never be agreed to. If you sell a company to a buyer, a banker found during the term of the engagement, yeah, they should be paid a fee for that, but there should be a period of time.
That’s called the tail period. Most bankers want a year to 18-month tail period where if you sell to a buyer, they found within, say, 18 months of when engagement terminates, they get paid their fee. As a seller’s representative, seller’s legal counsel, I’ll advocate for a shorter tail period, say six months, and we end up negotiating that.
It depends on how badly the banker wants this deal. It depends on how many bankers the seller’s talking to. Some tail period makes sense, but that’s a negotiated term.
Some sellers also want to make sure they have control over who the banker markets the company to. So it may be important to a particular company to pre-approve every potential bidder that’s going to get their confidential information. I know you’ve had bankers on your podcast, but an invest banker will prepare a SIM, a confidential information memorandum, that’s usually like a 30 to 50-page document that basically presents the company in its best light.
They’ll also prepare a teaser, a one-page document that doesn’t have the company’s name or any information about the company other than high-level financials and industry information and some basic information about the company and maybe why it’s going to market. The banker will send the teaser to hundreds of potential buyers. That teaser document was reviewed, and if it fits within a buyer’s investment policy statement or what type of companies they acquire, they’ll let the banker know and then take it to the next step where they’ll enter it into a non-disclosure agreement and get access to the SIM that has a lot more information.
A seller might want to limit who any of either of those documents go out to, and we can negotiate that term pre-approval rights of any potential buyer or bidder in the engagement order.
Armando (28:54 – 29:15)
And I imagine if the seller has not gone through this process before and they’re talking with an investment banker and the investment banker gives them an agreement for them to sign, they might think that’s a standard agreement and all those provisions are standard, and they might not realize that those are negotiable. Some of those provisions could be very harmful to that seller if things go south.
Phil (29:16 – 29:17)
Everything’s negotiable, Armando.
Armando (29:18 – 29:56)
Yeah, it is. And it’s just important that sellers understand that in this process, because again, this is a once-in-a-lifetime opportunity, and it really has to go right. If they’ve invested 20, 30 years of their life into this company and built a really nice company to then liquidate, or not to liquidate, but to then transition to the next owner so they can continue and take that to the next step, it’s just critical that they get this right and get the right people on board to help them.
So I’m just so glad we’re having this conversation. Let’s talk about, one of the things I hear about sometimes, Phil, is earnouts. Can you talk about earnouts in that sale process, and what does that really mean?
What’s that look like?
Phil (29:58 – 33:11)
Yeah, an earnout is a way to bridge a valuation gap. So let’s say you have a seller who thinks their company is worth $150 million, and a buyer thinks, based on the financials or other analysis, it’s worth $120 million. That was a $30 million gap.
This buyer might really want the company, so they might propose an earnout, which is, we’ll pay you the extra $30 million seller or an entrepreneur, but the company’s got to perform at a certain level after we buy it. We need to see the growth you’re telling us is occurring. You grew 50% last year.
You think you’re going to grow 40% or 50% this year. If that happens after we acquire the company, yeah, we’ll pay you that $150 million. It’s a contingent purchase price or contingent portion of the purchase price where the seller may get $120 million cash at closing, and they could get an extra $30 million, but it’s dependent on post-closing performance that happens maybe in the first and second year.
Sometimes it’s a three-year earnout. Earnouts are typically based on EBITDA, which is Earnings Before Interest, Taxes, Depreciation, and Amortization. EBITDA is basically a proxy for cash flow because you start with net income and you add back non-cash expenses, like depreciation and amortization.
Those are expenses on the balance sheet, but they’re no cash payment. You get to take them for tax and other purposes. EBITDA is generally how buyers and investment bankers will value companies.
EBITDA is a common metric for structuring earnouts because it’s a proxy for cash flow. How much cash is the business going to generate after the buyer acquires it? Another metric is revenue.
Maybe EBITDA is something that a buyer can control because they can control SG&A, selling in general administrative expenses. They can control salaries. A buyer could potentially drive down EBITDA by pumping a bunch of extra expenses through the balance sheet or through the income statement.
Revenue is a lot harder to manage or control. They’d basically have to pause the business or really do something to slow down the business to control revenue. Most of the time, everyone wants to maximize revenue.
From a seller’s perspective, I much prefer an earnout based on revenue, but that’s not always possible. Sometimes EBITDA is something that the earnout has to be based on. If that’s the case, what I’ll try to do is negotiate in some limits and some framework and parameters around what a buyer can do to the business after they acquire it.
We want to allow the seller to continue to run it. We want them to continue marketing programs, not to fire a bunch of people or hire a ton more people to change unless it’s agreed to by the seller where everyone is confident that’s going to increase EBITDA and help. Generally, that’s one way to manage and maximize the likelihood an earnout will be achieved.
Generally, earnouts and working capital disputes are the two things that lead to litigation post-closing. If a seller doesn’t get the earnout, they think the buyer breached the agreement and didn’t act in good faith, so they’ll sue. That’s a hard case to win.
There’s a lot of cases out there. If it’s done properly, ideally, you want to just have an agreement that requires the buyer to act in good faith and manage the company to maximize the earnout.
Armando (33:11 – 33:33)
Phil, you mentioned in your example, 120 versus 150 million, a $30 million gap. That $30 million might be the earnout. You also said that with the investment banker, they’re getting a success fee, a percentage of the sale.
How does the earnout and the investment banker fee on that $30 million difference, what does that typically look like or what do you want it to look like for your client?
Phil (33:34 – 34:03)
A lot of times, the investment banker’s engagement agreement or letter will have their fee paid on the entire deal value, assuming the earnout’s achieved. That, from a seller’s perspective, doesn’t make sense because you’re paying them their fee based on money that you may never get. One of the things that I’ll negotiate in is, we’ll pay you the fee on the earnout if and when we receive that earnout.
That makes sense. That’s a term that most investment bankers will agree to. They’re not going to necessarily offer it up front.
Armando (34:05 – 34:10)
The seller might pay a fee on $30 million of a sale that he never gets.
Phil (34:11 – 34:12)
Correct.
Armando (34:13 – 34:16)
That could be significant.
Phil (34:16 – 34:17)
Can add up.
Armando (34:19 – 34:30)
Great. Thank you. You’ve mentioned before to me normalized earnings and working capital adjustments.
What does all that mean and why should the seller care about that?
Phil (34:32 – 35:43)
You and I know that a lot of entrepreneurs will run expenses through their business that may be business-related but may not be. We all know that when a buyer acquires a business, they’re not going to keep the seller’s pontoon boat or yacht on the balance sheet. They’re not going to incur the expense of maintaining a Ferrari.
They’re not going to maintain the expense of some corporate chalet that’s a retreat that is on the balance sheet. All that stuff reduces taxable income. It reduces earnings.
The investment banker’s role is to basically normalize earnings before the company goes to market. Basically, produce pro forma historical financials and potentially going forward financials that add all those expenses back in to maximize EBITDA, which is earnings before interest taxes, depreciation, and amortization. Companies are bought and sold based on multiples of EBITDA.
You could have a $50 million company that sells for seven times EBITDA. Every dollar that you add to EBITDA, that you add to the bottom line is worth $7 in the seller’s pocket on a sale transaction. You add back a million dollars of normalized earnings, that’s a $7 million benefit.
Armando (35:44 – 36:06)
I can see how often at tax time, the business owner wants to minimize taxes. If there are some expenses that might be in the gray area, they might want to flush those through the business because it gets them a better tax number that year. But if they’re looking to sell in the next two or three years or so, it really might be hurting them to do that.
Phil (36:07 – 37:15)
If they’re willing, it’s better just to get all that stuff off the balance sheet and no longer expense it and just get the financial statements to be clean. It’s also super important for a seller to have a good accounting firm, a good accounting policy, and GAAP-compliant financials. That’s generally accepted accounting principles.
Any buyer of a company is going to want the seller to represent the financial statements or kept in accordance with GAAP, and that they’ve got some accounting policy statements that specify how they recognize revenue, how they book expenses. Most of the time, there’ll be a cash to accrual analysis that the buyer will do, having that covered by the accountant and understood. And the accountant, if they’re familiar with the business, they should be able to engage in a transaction and advise the seller and push back against a buyer who’s trying to drive the financials down, or we can implement in the agreement some agreed-upon accounting principles and procedures that the buyer will follow post-closing when they’re computing working capital, when they’re computing the earn out.
Armando (37:16 – 38:33)
Okay, good. Let’s go back to what you really began with. You said, begin with the end in mind, what do they really want?
It sounds like it’s really important for that owner, that seller to understand what are they trying to get to. You mentioned also, they typically want to take care of their family, of course, take care of the employees. They might have a legacy in mind where this company they built, now they want to see that continue and grow and flourish.
And if you listen to some of the podcasts out there, like How I Built This, they’ll talk about some of the owners that they sold to Procter & Gamble, because Procter & Gamble had the marketing system and the money to take that little company global. And that might be important to that seller. But in some of the pre-sale planning, can you talk again or touch and expand on, for the family, for that owner of the business, their own estate planning, what are some of the things that they can do and should think about as they’re thinking about this once-in-a-lifetime exit, the big tax impact that will come with it?
And when they have this opportunity to do some really once-in-a-lifetime things, what should they really be thinking about and how should they really look at that to maximize the value and really maximize their impact that they want to have on their family, on the community, et cetera?
Phil (38:34 – 41:29)
So that’s a big question, Armando, because everyone’s different. You may have a seller who is charitably minded and they want to have a good chunk of their legacy go to charities. A lot of entrepreneurs these days will set up foundations.
So it’s a family foundation. It might bear their name, their children, husband and wife are on the board. The goal is to have the grandchildren on that as they mature so that whatever money goes into that foundation can be used to advance whatever causes the family finds important.
Maybe grandma died of a certain type of cancer and they want to support organizations doing research in that. So setting up a family foundation along with the remainder of the estate plan often resonates with sellers. There’s social welfare organizations, which Mark Zuckerberg set something up in that regard.
You don’t get a tax deduction when you put money into that, but you have a lot more leeway in what that money can be used for. There’s not as much controls and oversight on what money in a social welfare organization is spent on. So some sellers like that, they might not need the income tax deduction, but they want to have control over what that money grows to and is used for.
There’s also all kinds of fancy estate planning vehicles like charitable remainder trust, charitable lead trust. There’s an alphabet soup of planning options that people have. A lot of them have income tax benefits where if part of a company is transferred to an exempt entity, a foundation or a charitable trust or a donor advised fund before a sale, when that sale occurs, a portion of the sale proceeds are not taxed at all.
It goes into an exempt vehicle. So it’s a way of, instead of having 40 plus percent of the purchase price go to the government or if it’s all capital gain, it’s 28% roughly depending on your state. It could be more if California, New York or certain other states.
That money stays in a charitable vehicle and is able to be used and deployed based on how the family wants it to be used. So it’s multiple conversations. It involves financial planners like you, Armando.
It involves estate planning lawyers. Once a decision is made, that’s when the corporate lawyers get to work of forming entities, transferring, gifting, selling assets to trusts. And when I say selling, these are not taxable sales.
These are trusts that are set up where it’s disregarded. It’s a grant or trust with the entrepreneur, the owner or spouse treated as the income tax owner. So it’s like taking asset from your right pocket, moving it to your left pocket.
There’s no tax. It’s just moving the ownership and allowing that asset to then be held in a asset protected estate tax protected vehicle that might also have charitable and income tax deductions that go along with it.
Armando (41:29 – 42:01)
We will often hear people talk about establishing their own private foundation and they don’t realize what that really entails. The cost to set it up, the ongoing cost, the ongoing rules, where on the other extreme of that same spectrum, they can look at something as simple as a donor advised fund, which literally has zero setup costs, and they can have the same or very, very similar impact with those dollars. They just don’t know that.
Phil (42:02 – 43:11)
Donor advised funds are great. They’re set up and provided by existing taxes and charities, where they’ll set up a fund in a person’s name, the entrepreneur’s name, and money that goes into that, you get a tax deduction for that. Or if it’s equity, depending on what goes in there, the sale proceeds can be received by that fund tax free.
And then it’s advised. So the family, the entrepreneur who put that gift into the donor advised fund can recommend what that money gets used for. Now, charities, they’re going to listen most of the time, as long as it’s a legitimate purpose for the charity, they’re going to listen to the entrepreneur.
But the reason it’s called an advised fund is that the charity itself has ultimate control over it. Now, that’s almost never an issue. But that’s just something to be aware of versus a foundation is controlled by the family, the board of the family is picked by the entrepreneur, and can be a self perpetuating board, they can be a member, they can have the right to change board members.
We’ve got a nonprofit group that set these up all the time and do a ton of this planning. So I know enough to be dangerous, Armando.
Armando (43:13 – 43:19)
Or know enough to be helpful when you’re having these conversations, know when to pull that team in to have the conversation with the seller.
Phil (43:20 – 45:06)
Yep. And that’s, you know, that’s what a good M&A lawyer will do. It’s a specialized industry, and there’s sub specialists in M&A.
You know, when I receive a 100 page, you know, stock purchase agreement from a buyer or membership interest purchase agreement or asset purchase agreement, those are all different versions of the same document. There’ll be, you know, 20, 30 pages of representations and warranties that the buyer wants the company and the seller to make. There’ll be data privacy and cybersecurity is a huge area that could be two or three pages.
We’ve got specialists in that area that I’ll have review that section of the agreement and make sure that we’re not gonna have an immediate breach when we sign and close that whatever we’re saying about the company is accurate. And if it’s not, we’ll get policies and procedures and fill those gaps before we close. Labor and employment, particularly when a company is operating in California is a huge issue.
You know, there’s PAGA claims, there’s, you know, conservative or class actions. Pretty much most companies that are operating in California of any size are gonna end up with some kind of employment lawsuit just because the laws are so complex, and it’s so easy for, you know, plaintiff’s lawyers to just get a class or get some workers and sue a company. We’ve got teams of lawyers in California that deal with that stuff all the time.
So if it’s a California deal, I’ll have that team review the reps and warranties and make sure that we’re not gonna be making reps that are not true and make sure that we qualify reps with knowledge or put on a schedule to the agreement, a, you know, a issue we already know about. And if the buyer buys the business, when we’ve disclosed an issue, you know, there’s a claim that’s pending, or there’s this issue we know about, we’re not in compliance with this law. If they close over that and don’t add a provision called a special indemnity, they’re taking the risk on that, and that’s part of the negotiation that goes on in this kind of transaction.
Armando (45:07 – 45:32)
Okay, fantastic, fantastic. I do want to touch on a couple of other areas as well. You’d mentioned to me before about, well, you mentioned also in this conversation about discounted valuations, and what does that really mean, Phil?
If a company is worth, to use a round number, $100 million, and you’re looking at discounted valuations, where does that really come into play?
Phil (45:33 – 47:33)
So it comes into play when a entrepreneur is transferring or selling part of the company to trusts that they’ve set up. And this could be a gift trust for children and grandchildren. It could be a trust for a spouse.
It could be a trust for whoever. Instead of, you know, let’s say they want to put half the company in these trusts and keep half in their own name. Instead of transferring $50 million and telling the heiress I made a $50 million taxable gift, we might be able to discount that by up to 40%.
So instead of $50 million, it could be $30 million. And with the exemption where it’s at, a husband and wife can transfer, you know, almost $26 million. So the way I build it, gift $26 million into trusts for each other.
Those are called spousal lifetime access trusts, or SLAPs, where the wife will set up a trust for the husband and gift a portion of the company into that. The husband waits a little while and sets up a different trust for the wife. The trust cannot be reciprocal.
The estate planners will tell you, you can’t violate the reciprocal trust doctrine. If there’s enough time between the gifts and if you have enough runway, this can be done where they are not reciprocal and the heiress will respect the trust and the tax courts will respect them. The husband can do the same thing where you might really get, you know, $30 or $26 million that might equate to about $42 million of that company on an absolute value standpoint.
And then the rest, they can sell at a discount to a trust. So you gift in part and the rest you sell. And the reason a sale is not taxable is because the entrepreneur takes back a promissory note.
And that note could have a fairly low interest rate. It could have a balloon payment in 10 or 20 years. So it’s a way of transferring an asset at a discount.
And if the business is growing at a rate faster than the interest rate, all that growth, the delta there is in the trust, is protected from the estate taxes, protected from creditors. And if a company sells, that note can be paid back and that money can be used to pay the tax. So then you effectively have the note that goes away upon a sale or it goes away in part.
Armando (47:33 – 48:02)
Yeah, that’s fantastic. I imagine a lot of this might be Greek to a lot of people, but the point would be that there are things that can be done when they’re done in advance with enough time where you can dig into things and understand what that owner, what that family is trying to get to, what they’re trying to accomplish, and the different tools that you have within your tool chest that can be used for their benefit. But they’ve got to talk with you in enough advance time where you have time to get all of these things done before the sale, right?
Phil (48:02 – 48:19)
Yeah, exactly. And a good estate planner will lay it out in charts, will show here’s where we are, here are the steps to get where we want to be, and here’s where you’ll be post-planning. And then you can show the closing, where the cash goes, and then you can implement financial planning on the net proceeds at that point.
Armando (48:19 – 48:39)
And so getting back to what you just touched on, that example of the company is worth a hundred million dollars and they do some of these interesting things that are within all the rules and it’s done the right way to make sense, then when they actually do sell that company, they’re paying tax on what real value of the sale of half?
Phil (48:39 – 50:07)
Yeah, so these days the proceeds should be largely capital gains. So subject to the preferential capital gain rate, which is federally currently 20%. There’s a net investment income tax.
Sometimes that applies, sometimes it doesn’t, but I tell most people, at least if they’re in Arizona, you just use a 20% tax rate when you’re selling your company, that’ll give you a good estimate of how much you’ll be able to walk away with effectively 72% of whatever the purchase price is. So a buyer will value a company on an enterprise value basis. That means they’re looking at the left-hand side of the balance sheet, the assets.
So what would I forget how you finance a company, whether it’s debt or equity or a combination of debt and equity, a buyer’s going to tell you what they’d pay for all your assets, what they pay for the company on a cash-free, debt-free basis. And then let’s say we get to a closing, they’ll pay that amount. You’ve got to use a portion of that to pay off any debt.
So when you’re computing how much you’re going to pocket, you’ve got to take the debt off the top. Then you’ve got to look at what’s your tax basis in the assets. Your accountant should be able to give you that number.
So then you can plug that in. The taxable gain is going to be what buyer pays minus your tax basis. So you look at that, that’s how much you’re going to be taxed on.
Even if most of it goes to pay debt, you’re still going to be taxed on the higher number.
Armando (50:09 – 50:12)
Yeah. It could be a substantial savings though, by the planning ahead of time, for sure.
Phil (50:13 – 50:14)
Yep. Absolutely.
Armando (50:15 – 50:49)
Wow. Okay. And Phil, what have we not talked about yet?
When you meet a brand new prospective client and they’re saying, Hey, I’ve got this offer. I’m thinking I might go ahead and start this wholesale process. Or they have a first conversation with you.
I think I want to sell in three years, Phil. I think my company has sold for $50 million. What are some of those points in that conversation where the owner of the business, that seller, is maybe a little surprised when you mentioned those areas?
Phil (50:50 – 52:51)
First thing I look at is what type of entity they have, what tax selections have they made, and do we need to change any of that? Maybe they’re a C-corp and C-corp’s a company that pays its own tax, but there’s double taxation if it sells its assets and distributes the net proceeds. If you have enough time, you can make a sub-chapter S selection, freeze the value.
And if you sell after a certain number of years, there is no double tax. That goes away. And you should be able to structure a deal so it’s mostly capital gain and not ordinary income.
Ordinary income for an individual, at least federally right now, is 37%. That’s going to go up to 39.6% in 2026 after the Trump Tax Act sunsets or parts of it sunset. So understanding what tax planning they’ve done, whether we need to make some changes is the first thing I’ll talk about.
And then getting an estate planner involved if the client’s inclined to do some estate planning and get some asset protection planning going. And then the next step is to go through the business and do some pre-sale diligence and find out what gaps are there and what holes we might need to plug, what legal documents and legal structures we might want to implement to make sure that we can sail through diligence. There’s an adage that most people are familiar with in the M&A industry, and that is that time kills deals.
That means the longer a deal takes to close, the less likely it is to close. And if a company goes through a three-month process or six-month process and the deal dies, that’s a huge distraction. It’s a huge cost.
Lawyers get paid whether or not a deal closes. Investment bankers get paid only if it closes, other than maybe a retainer or some kind of expense reimbursement. So you’re going to end up with legal fees.
You’re going to end up with potentially accounting fees for a deal that dies. So you’re much better off if you’ve got the right buyer moving quickly. And in order to move quickly, you need a team that can scale and get a deal done within a reasonable period of time.
We haven’t gotten to what happens after the letter of intent is signed, Armando.
Armando (52:51 – 52:52)
Let’s go there then.
Phil (52:54 – 56:38)
So once a letter of intent is signed, the buyer kicks in high gear and they’ll provide due diligence request lists. There’ll be an accounting diligence. That’s where they’ll have their outside accounting firm look through your chart of accounts, look through all your systems.
They’ll want to know what your accounting policies are. They’ll really take a close look at your tax returns, your financial statements. And then there’s a legal diligence.
So as a seller’s lawyer, I’ll work with the buyer’s lawyer and help respond to that. If we’ve already got a data room set up, we’ll reorganize the data room to follow what the buyer wants to see and then give them access to that. They’ll conduct that diligence.
They’ll ask questions. They’ll want to have potentially diligence calls or meetings where the labor and employment team with the buyer’s counsel is on that. And they’re going to ask about your employment policies.
What’s your I-9 verification process? Do you e-verify? Do you have independent contractors?
How do you know they shouldn’t be employees? There’s going to be, they’re going to look at the company with a microscope to identify any risk. If a deal is going to be insured, meaning the buyer or the buyer and seller are going to pay for a rep and warranty insurance policy, the diligence is even more significant because that insurance company is going to have their own diligence team that’s going to look at everything the buyer did, everything that the seller provided.
And they’re going to ask their own questions because they’re going to want to make sure they’re comfortable with the amount of risk they’re taking if they issue an insurance policy for the deal. After that diligence is pretty far along, we’ll see a purchase agreement and ancillary agreements from the buyer. So we’ll get a stock purchase agreement or asset purchase agreement.
We’ll get a form of employment agreements. Sometimes there’s a rollover agreement where the seller will be asked to take part of the cash proceeds and not receive cash. Instead, they’ll contribute part of the business into a fund, maybe a private equity fund and become a limited partner in the acquiring fund.
That’s a rollover equity and that should be structured almost all the time. So it’s tax deferred. So if you get cash for 80% of the business and you roll over 20%, the 20% that you’re basically using to invest in the buyer should not be taxed until the buyer sells what it’s building.
It’s roll up all the companies it’s acquiring and adding together to then go public or sell to another even bigger private equity fund. So all those agreements come our way as the seller’s lawyers, we’ll review it, we’ll go through it, we’ll modify it, make sure it’s market, make sure that it follows the letter of intent and what the buyer has told us they’re willing to do and what they’ve committed to. There’ll be schedules as part of that that we’ll fill out and help the entrepreneur or the seller complete schedules, which is all kinds of disclosure the buyer wants about the company.
Those go back and forth. And then once the agreements are finalized, there’ll be a closing that’s set. And there’s two types of deals.
There’s deals that sign all the final documents and close on the same day. And there’s deals that have a signing and then a delayed closing. So everyone’s bound under a binding purchase agreement.
And then closing might be in 30 days or 45 days. Deals that have a delayed closing, it’s usually because of regulatory approval, Hartscott-Rodino or HSR, that’s an antitrust filing for any deal that’s significant size, the companies have to make and the government will look at it to make sure it doesn’t reduce competition. They’re worried about stifling competition through M&A and that’s been in news a lot.
So that’s one reason that we might have a binding signing but a delayed closing. Once we get to closing, that’s when all the documents are executed. That’s when the buyer’s financing source will be lined up and the money will be wired once everyone has signed what they need to sign and the lawyers indicate we’re ready to close.
Armando (56:39 – 57:09)
Wow. So then once the close is done, now the seller is taking a deep breath because now the company is done. Everything is all done.
They’ve got their money wired in. And ideally, they want to be able to walk away from that and know that it’s all been buttoned up and addressed and there aren’t issues later. You mentioned rep and warranties insurance.
Is that always a good idea to have that or not necessarily?
Phil (57:11 – 59:56)
There’s an expense. It costs money. So someone’s got to pay that fee.
Sometimes, depending on how competitive the process is or if a seller, there’s a particular buyer they’re talking to, neither one might want to pay the fee to the rep and warranty insurance company. There’s some industries that involve environmental issues and whatnot where there might be exclusions or it doesn’t make sense to buy the insurance. But vast majority of the time, it does make sense to pay for that and buy that if the deal’s of any size.
If it’s a $10 million deal, it’s not worth it. Even $20 million, it’s questionable whether that fee is worth it. For a $20 million deal, you might see a fee of like $125,000.
So that’s how much is going out the door to the insurance company to offload the risk and to reduce the escrow amount. So every deal is a little bit different. And sometimes it depends on the buyer.
There’s generally two types of buyers. There’s financial buyers. Those are private equity funds and family offices.
And then there’s strategic buyers. And those are companies in the industry or parallel industry that want to acquire a company, a seller for strategic purposes. They want to vertically integrate or horizontally integrate.
They want to acquire a distributor, a company that’s one of their distributors. So they want to acquire a supplier or they want to get into geographic area where maybe you’ve got a company that’s got East Coast operations and they want West Coast. So that’s a strategic buyer.
And they look at deals differently than a financial buyer. Strategic buyer will look at financials, but they’ll look at what savings and what other markets can I get into? If I acquire this company for a multiple of EBITDA, great.
But they might be able to take their existing operation and add it to the sales pipeline and double sales of an existing operation. So most of the time, a strategic buyer is able to pay more because they’re going to look at, going forward, it’s not just a financial, how much cash can we get out of this business? It’s that plus how much more revenue and how much savings can we generate from our existing portfolio of businesses.
On the private equity side, they have some of that because a lot of private equity funds have companies that have already acquired and they can look at how this target, the seller, can company can fit into that portfolio and they may be able to get similar kind of strategic benefits, but it’s much more often, it’s much more of a financial analysis and they’re valuing a company based on EBITDA. For SaaS companies, which are software as a service companies, like DocuSign and others, those companies are valued based on a multiple in revenue or recurring sales. It’s a different metric.
So depending on what industry the seller’s in, the valuation that a buyer is going to look at could differ. And it depends on the buyer too.
Armando (59:56 – 1:00:15)
Yeah. It seems like here locally in Arizona, so many small companies have grown up and become very nice, valuable companies that if somebody wanted to, say, from the East Coast, get a footprint in Arizona or the Southwest, the easiest ways to buy an existing company that already has a sizable footprint here and they could expand their operations to Arizona.
Phil (1:00:16 – 1:00:41)
Yep. From the buyer’s perspective, it’s a buyer build. It’s a lot quicker to buy something that exists already than to build it from scratch.
And there’s a lot of reasons you might want an existing company, workforce in place, intellectual property, systems, software that the company’s developed. There’s lots of reasons a buyer is interested in acquiring an existing business versus opening an office and just organically expanding.
Armando (1:00:42 – 1:01:01)
Yeah. I spoke with a company that bought a smaller company just a few months ago, and they bought them because they needed the people. They needed the experienced, skilled staff.
And that was the whole reason why they bought the company. Not for new customers or new product lines, none of that. They needed the skilled, experienced workforce for their own client base.
Phil (1:01:02 – 1:01:03)
Yeah. Makes sense.
Armando (1:01:03 – 1:01:31)
Yeah. So, it’s important to understand, of course, what is motivating that seller and motivating that buyer to really get the best fit. And you as the attorney who’s got this whole team with you as you talk with that seller, you can bring in the other people who might be missing and really help that seller have the best exit or more likely have the best exit possible by being a good listener and bringing in those people as they’re required.
Phil (1:01:32 – 1:01:39)
That’s right. It’s important to hear what an entrepreneur wants, what their goals are, and to make sure that we keep those in mind through the whole process.
Armando (1:01:39 – 1:03:44)
Yeah. And we talked about a lot, Phil. Let me just touch on a couple of areas.
You talked about rep and warranties, insurance course, knowing what does a seller really want? What is he or she really trying to accomplish? That that’s important, that it helps to give you some direction.
You talked about a tail period on insurance before the seller signs anything, have that letter of intent reviewed by legal counsel because you can help build in protections before they hire that investment banker, talk with legal counsel, you, so that you can help them build in protections and make that agreement really in the seller’s best interest versus anybody else. You talked about retrading. That seems like it’s always a negative.
If the buyer wants to have any kind of a retrade, that is not a good thing for the seller. Retrade just means it’s just not in their interest, either lower purchase price or the conditions change, whatever. It is just not a good thing for them.
You also touched on taxes, ordinary income versus capital gains. Capital gains are much lower than ordinary income tax rates. And taxes can be just significant throughout this process.
You mentioned asset protection as well and looking at trusts, spousal types of trusts or dynasty trusts. You also touched on charitable intent with different types of child remainder trust, et cetera. But really getting to the point that estate planning perspective has to come into play here to really help that seller have the outcome that’s going to be best long-term for them once this is all done.
So I think the point is, as you touched on so many different areas, I think the point that that seller needs to really hear is there’s a lot to this whole exit picture. And if you’ve never gone through it or gone through maybe once before, you’ve got to get the right people on board who understand this, like you and the team that comes with you, so that you can have those conversations with them and help them understand so that they really can make those best decisions for themselves as they’re going through this once-in-a-lifetime opportunity.
Phil (1:03:45 – 1:03:46)
It was a great summary, Armando.
Armando (1:03:47 – 1:04:00)
Good. Well, Phil, thank you so much for the conversation. Really, really appreciate it.
And if somebody wants to get a hold of you and just likes what you said in that, what’s the best way for them to reach you to have a conversation with you?
Phil (1:04:01 – 1:04:09)
Email or phone, they can Google my name and Polsenilli, Gatilla, I should pop up. I’m on LinkedIn too.
Armando (1:04:09 – 1:04:25)
Okay, fantastic. Phil, again, thank you so much for the conversation. Really enjoyed it.
And let’s hope that the right seller hears this and gives you a call before they start walking down that path so you can help them have a more successful exit in that once-in-a-lifetime opportunity.
Phil (1:04:25 – 1:04:27)
Thanks, Armando. It’s been my pleasure.
Armando (1:04:27 – 1:04:55)
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