LUTZ BUSINESS INSIGHTS
selling your business? the financial information buyers want to see
bill kenedy, LUTZ consulting and m&a shareholder
All buyers and bankers require accurate and timely financial information when working on an acquisition. This is obvious. However, many times the target businesses do not produce the required financial information that is needed on a timely basis. This begs the question, what exactly are buyers and bankers looking for when asking for a business’s financial details? This blog highlights the essential documents business owners need to have at the ready when preparing for a sale.
What Financial Documents Do Buyers Need?
During the due diligence phase of a business sale, buyers and bankers request a significant amount of financial information about the company. This list will include not only the Company’s year-end tax returns or financial statements, but also financial reports by customer, vendor, salesperson, company location, customer location and division, to name a few. Here is a full list of documents a business owner should have at the ready for potential buyers:
- Year-end income tax returns, sales/use tax returns, personal property tax returns
- Profit & loss statements and balance sheets (monthly)
- Insurance policy information, including workers comp claim details if applicable
- Copy of lease agreements
- Fixed asset details
- Executive summary/overview of business
- Sales reports by product/service and customer
- Purchases by vendor/product
- Inventory reports by product including analysis of slow moving products
- Details of any recent litigation involving the business
Most buyers require this information to ensure that the business they are buying is in good standing. However, before any critical information is provided to a buyer, it is imperative that all parties involved in the transaction sign a Non-Disclosure Agreement (NDA). This contract helps protect yourself and your business from any leak of sensitive information.
Having CPA prepared year-end financial statements isn’t necessarily a requirement for a business transaction; however most buyers find it helpful. Maintaining accurate information will help you estimate a fair asking price and will help you fix any issues that could jeopardize a sale. If you are feeling overwhelmed or are still unsure what financial information you will need to provide, consider seeking help from a professional.
In summary, the selling company should be able to produce accurate financial statements (annual and monthly) and other management reports used to monitor company performance. These documents help potential buyers better understand your company as a whole and can help improve your chances of locking in a deal. If you have any questions, please contact Lutz M&A for assistance.
ABOUT THE AUTHOR
BILL KENEDY + LUTZ CONSULTING AND M&A SHAREHOLDER
Bill Kenedy is a Lutz Consulting and M&A Shareholder at Lutz. He specializes in business valuation, litigation support, and merger and acquisition advisory services.
AREAS OF FOCUS
AFFILIATIONS AND CREDENTIALS
- American Institute of Certified Public Accountants, Member
- Nebraska Society of Certified Public Accountants, Member
- Certified Public Accountant
- Accredited in Business Valuation
- Certified in Financial Forensic
- Certified Exit Planning Advisor
- BSBA in Accounting, St. John’s University, Collegeville, MN
- Construction Financial Management Association, Past Treasurer, Board Member
- A Time to Heal (non-profit focused on cancer patients), Past Board Member
- Understanding the Tax Implications of a Business Sale
- The M&A Client Experience
- Lutz M&A Advises Midwest Scaffold Service on its Sale to Sunbelt Rentals
- 5 Key Purchase Agreement Considerations
- Net Working Capital: What is it and How is it Used?
- Issues During the Due Diligence Process in M&A Transactions
- Lutz M&A Advises Fantasy's, Inc. on its Acquisition by Casey's General Stores
- Primary Benefits of Selling Your Company to an ESOP
- Is An Employee Stock Option Plan Right for Your Business?
- Lutz M&A Advises C&W Transportation on its Sale to Platform Capital
- Our Services, Our People, and Our Results
- Lutz M&A Advises Hands of Heartland on its Recent Investment by Evolve Capital
- Lutz M&A Advises Labor Source on its Recapitalization by Great Range Capital
- Overcoming Obstacles in Business Transition Planning
- Understanding Net Working Capital in Business Transactions
- How to Increase the Value of Your Business
- When is the Right Time to Exit My Business?
- Lutz M&A Advises Triage Staffing on Recapitalization
- Lutz M&A Advises Hockenbergs on Recent Sale to Trimark USA LLC
- Lutz M&A Advises Focus Respiratory on its Recent Buyout by Valley Healthcare Group
- Is Your Small Business at Risk of Fraud?
- Lutz M&A Advises CCW, LLC on its Recent Buyout
- Lutz M&A Advises NIFCO Mechanical Systems on Recent Sale
- Lutz M&A Advises Midwest Door & Hardware on Recent Sale
- Why is Forensic Accounting Needed?
SIGN UP FOR OUR NEWSLETTERS!
We tap into the vast knowledge and experience within our organization to provide you with monthly content on topics and ideas that drive and challenge your company every day.
13616 California Street, Suite 300
Omaha, NE 68154
747 N Burlington Avenue, Suite 401
Hastings, NE 68901