Your Pittsburgh business for sale is just what the buyer has been looking for. The buyer has reviewed your financial statements and has made an offer contingent on several items. You’ve reviewed the offer and it looks fine, so what’s next? The contingencies in the deal mean that the buyer or his or her advisors have some concerns. In larger deals, this process might be called due diligence. However, in the smaller Pittsburgh business for sale scenario, the items of concern are usually spelled out as opposed to a general review of everything. The reason for this is that larger companies have a lot more areas of concern than the typical smaller Pittsburgh business for sale.
Most contingencies concern the review of financial statements and/or business tax returns. Others may involve lease issues, the seller staying on for a set period of time, or some very specific issue such as repaving the parking lot, if the landlord will not or is not required to.
Unfortunately, some contingencies may be hiding other ones such as a list of fixtures and equipment included in the sale. Sounds easy on the surface, but the seller forgot that two pieces of equipment currently not in use need repair or the walnut desk in the office belongs to their Grandfather and is not included. Or, while reviewing the lease, the buyer discovers that the landlord requires that the business must close by 6:00 PM or some other restriction applies and was not disclosed. Deals have fallen apart over similar issues.
Most contingency problems can be resolved prior to the business being placed on the market. The seller should do all of the following:
• Check the status of all furniture, fixtures and equipment (FF&E). Remove any FF&E that are not included in the sale or not in use – or make repairs.
• Review all contracts such as the building lease and equipment leases that will be assumed by the buyer. Make sure there aren’t “problems” in them. If there are, disclose them to a potential buyer out front – and be sure your Pittsburgh Business Brokers – TM Business Brokers are also aware of them.
• Be prepared to answer questions such as:
– Are there any environmental, governmental or legal issues?
– How long will you be willing to stay and work with a new buyer – at no cost?
– Will the employees stay?
– Why was last year the worst one in years?
– Why was last year the best one in years?
The list can go on and on, but sellers need to be ready. Buyers don’t like surprises. Pittsburgh Business Brokers – TM Business Brokers know the process like a book. We can be invaluable in preparing the business for the marketplace.
