Financial Information-Outside Accountant
It is customary to have a Non-Disclosure Agreement (NDA) signed by both the Seller and Buyer once potential merger or acquisition discussions begin. Only after the NDA is signed should the sharing of confidential information begin. In many cases the Seller has not shared the fact that they are evaluating whether to pursue a merger or acquisition with their internal Management Team. Therefore, the Seller has to rely on outside accountants to provide financial information to the Buyer. It is typically not difficult to obtain prior and current year financials, the real challenge is getting to items that would be considered non-essential costs to a new owner. Items such as costs associated with life insurance on the owner, personal costs associated with company cars, entertainment on a personal basis, compensation and perks afforded the Seller, etc., that are included in the Income Statements and are considered adjustments to EBITDA.
To be prepared without raising concern from your internal team, you should have these items compiled by your outside accountant on an annual basis, with backup supporting the adjustments. This will avoid going back to your team for this information, who may become suspicious of providing this data, increasing the risk that people will become aware of your plans to consider a sale of the business. Early speculation about the potential sale of the Company can cause significant disruptions to the operations of your business.
Adjusted EBITDA is the primary factor in determining the value of your Company and you should be prepared to provide this information when asked for it by a potential Buyer.
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