BUYING A BUSINESS BUYING A BUSINESS OVERVIEWOVERVIEW

Markus May, Esq. Markus May, Esq. May Law Firm, Ltd.May Law Firm, Ltd.

400 East Diehl Rd. Suite 130 400 East Diehl Rd. Suite 130 Naperville, IL 60563 Naperville, IL 60563

630-864-1004630-864-1004

mmay@illinois-business-lawyer.comwww.illinois-business-lawyer.com

First, we First, we must find must find the right the right

business to business to buy!buy!

FINDING A BUSINESS

Assemble experienced team

of advisorsCreate portfolioGet finances in order

Research types of businesses

Hire broker/Intermediary?

Find potential businesses

Contact potentiallenders

Get Your Financial House in OrderGet Your Financial House in Order

Consolidate/pay off debtConsolidate/pay off debt

Limit expenses Limit expenses

Consult a financial advisor Consult a financial advisor

Accountant

Financial Advisor

Lender

Attorney

ASSEMBLE EXPERIENCED

TEAM OF ADVISORS

Create a Portfolio Create a Portfolio

Sell yourself! Sell yourself! To seller and lendersTo seller and lenders

Financial information Financial information

Resume – why you will succeed!Resume – why you will succeed! To private equityTo private equity

• Resume – how you will help them Resume – how you will help them succeed!succeed!

Contact Potential Lenders Contact Potential Lenders

Determine how much business you can afford - budget purchase price and working capital

Determine potential sources for lendingTraditional SBAOther Sources: Angels, Mezzanine

Research Types of BusinessesResearch Types of Businesses

INDUSTRY? SERVICE OR PRODUCT?

FRANCHISE?What is my

skill set?

Hire a Buy Side Hire a Buy Side Broker/Intermediary?Broker/Intermediary?

Focus on an industryFocus on an industry You may get faster results and reach You may get faster results and reach

sellers not willing to talk with buyerssellers not willing to talk with buyers Generally limited to one broker at a timeGenerally limited to one broker at a time Negotiate broker agreement Negotiate broker agreement

Finding Potential BusinessesFinding Potential Businesses

Network at MBBI meetings and seminarsNetwork at MBBI meetings and seminars Broker referralsBroker referrals Websites: e.g. Websites: e.g. www.businessforsale.com NewspapersNewspapers Word of mouth Word of mouth Cold callsCold calls Etc....Etc....

WHEN YOU HAVE FOUND WHEN YOU HAVE FOUND THE BUSINESS YOU WISH THE BUSINESS YOU WISH

TO BUY...TO BUY...

ONCE YOU HAVE FOUND

A BUSINESS

Term Sheet or Letter of Intent

Due diligence Finalize financing

Gather informationfrom seller

Review financials Structure deal

ClosingPurchase AgreementAncillary Agreements Post-Closing

Information from SellerInformation from Seller

Gather financial and other information Gather financial and other information from Sellerfrom Seller Usually requires a confidentiality or Usually requires a confidentiality or

non-disclosure agreement (NDA) non-disclosure agreement (NDA) Negotiate NDA carefully so you don’t limit Negotiate NDA carefully so you don’t limit

future options future options

Review Financials and Industry Review Financials and Industry InformationInformation

Determine if this is a good business to Determine if this is a good business to proceed forward with from a financial proceed forward with from a financial perspectiveperspective

Try to get as much information as possible Try to get as much information as possible about the business about the business

Research the industry and business as Research the industry and business as much as possible without tipping off future much as possible without tipping off future competitors or violating the NDAcompetitors or violating the NDA

Structuring the DealStructuring the Deal

Discuss how to structure the deal with Discuss how to structure the deal with an attorney and/or accountantan attorney and/or accountant

Asset or Stock? What assets?

How will price be structured?

How will other aspects of the deal be handled?

Draft Basics of the DealDraft Basics of the Deal

Term Sheet or Letter of Intent Term Sheet or Letter of Intent Sets forth the basic terms of the dealSets forth the basic terms of the deal Takes the company off the marketTakes the company off the market Provides time for in-depth review of Provides time for in-depth review of

company informationcompany information Deal often changes after further reviewDeal often changes after further review Long or short forms – psychology of the Long or short forms – psychology of the

dealdeal

Begin Due DiligenceBegin Due Diligence

Financial

Operational

Legal

Finalize FinancingFinalize Financing

Get all necessary information to lender Get all necessary information to lender earlyearly

Respond promptly to lender requests Respond promptly to lender requests Get blank copies of documents to be Get blank copies of documents to be

signed in advance signed in advance

Purchase Agreement

Negotiations continue on details

Draft the first version

Very important for liability and the

bottom line

Ancillary DocumentsAncillary DocumentsLease Lease

Employment Agreement Employment Agreement

Non-Competition AgreementNon-Competition Agreement

Security Agreement Security Agreement

Promissory Note Promissory Note

Bill of Sale and AssignmentBill of Sale and Assignment

Lien Searches Lien Searches

Company ResolutionsCompany Resolutions

Closing StatementsClosing Statements

Guaranty AgreementGuaranty Agreement

Name ChangeName Change

Etc.Etc.

ClosingClosing

Final transfer documents signed Final transfer documents signed Purchase price paid or dry closingPurchase price paid or dry closing

Post-ClosingPost-Closing

Have a plan Have a plan Cast a visionCast a visionHave a checklist Have a checklist Deal with Post-Closing issues related to Deal with Post-Closing issues related to

purchase purchase

Markus is a client focused and service oriented Markus is a client focused and service oriented attorney with knowledge in a broad range of attorney with knowledge in a broad range of industries and experience in dealing with all levels industries and experience in dealing with all levels of management and clients. He offers his clients of management and clients. He offers his clients conscientious and practical legal advice. His legal conscientious and practical legal advice. His legal experience includes buying and selling companies, experience includes buying and selling companies, corporate law including business entity formations, corporate law including business entity formations, drafting and negotiating contracts, and commercial drafting and negotiating contracts, and commercial litigation. Markus’ background in marketing and litigation. Markus’ background in marketing and running a business unit are valuable in running a business unit are valuable in understanding business clients' situations. His understanding business clients' situations. His analytical abilities help his clients analyze facts and analytical abilities help his clients analyze facts and focus on what is accurate and makes sense. He focus on what is accurate and makes sense. He helps his clients move toward their goals in an helps his clients move toward their goals in an efficient fashion while encouraging out of the box efficient fashion while encouraging out of the box thinking. Markus enjoys instructing and counseling thinking. Markus enjoys instructing and counseling clients on the best way to solve their legal and clients on the best way to solve their legal and business problems. business problems.

Markus i a member of the Illinois State Bar Markus i a member of the Illinois State Bar Association, Chicago Bar Association and DuPage Association, Chicago Bar Association and DuPage County Bar Association where he participates in County Bar Association where he participates in numerous committees. He has Chaired the ISBA numerous committees. He has Chaired the ISBA Business Law Section Council, CBA Mergers and Business Law Section Council, CBA Mergers and Acquisitions Committee, CBA Business Law Acquisitions Committee, CBA Business Law Committee He has written articles which have Committee He has written articles which have been published in the Illinois State Bar Journal and been published in the Illinois State Bar Journal and the DuPage County Bar Journal and is on the the DuPage County Bar Journal and is on the Publications Committee for the DuPage County Bar Publications Committee for the DuPage County Bar Association. He served six years on theAssociation. He served six years on the

Markus May, Esq.Markus May, Esq.Board of Directors of the Midwest Business Brokers and Board of Directors of the Midwest Business Brokers and Intermediaries organization. He has presented at Intermediaries organization. He has presented at numerous seminars on issues related to the purchase numerous seminars on issues related to the purchase and sale of businesses. Markus is also involved with his and sale of businesses. Markus is also involved with his church where he served as a deacon.church where he served as a deacon.

Markus attended the University of Colorado School of Markus attended the University of Colorado School of Law where he was class president and on the University Law where he was class president and on the University of Colorado Law Review as a Staff Editor. He was a of Colorado Law Review as a Staff Editor. He was a member of the Dean's List and a recipient of the Dean's member of the Dean's List and a recipient of the Dean's Scholarship. Markus received a Bachelor of Science in Scholarship. Markus received a Bachelor of Science in Marketing degree from the University of Colorado where Marketing degree from the University of Colorado where he graduated Cum Laude and was a member of the he graduated Cum Laude and was a member of the Golden Key and Delta Gamma Sigma National Honor Golden Key and Delta Gamma Sigma National Honor Societies.Societies.

Markus was licensed to practice law in Illinois in 1999 Markus was licensed to practice law in Illinois in 1999 after first being licensed in Colorado in 1991. after first being licensed in Colorado in 1991.

Markus MayMarkus MayMay Law Firm Ltd.May Law Firm Ltd.Naperville Financial CenterNaperville Financial Center400 E. Diehl Rd., Suite 310400 E. Diehl Rd., Suite 310Naperville, IL 60563Naperville, IL 60563630-864-1004630-864-1004

mmay@illinois-business-lawyer.comwww. Illinois-buisness-lawyer.comwww. Illinois-buisness-lawyer.com