by Scott Bushkie, CBI, M&AMI
I just spent eight months working a deal that nearly tanked at the last minute. My client was selling a business that served the Michigan automotive industry, and we helped him secure a buyer.
The deal was so close to closing, and everyone felt so confident, that my client had already invited the “new owner” to come along on customer calls. (A huge mistake by the way, but that’s a topic for another time.)
The closing day was set, and we just needed to finalize what should have been a few minor details. Then, at the eleventh hour, the buyer’s accountant asked for a particular point of negotiation that would have cost my client $300,000 in tax implications – or roughly 10 percent of his takeaway.
The owner and I had several discussions with his CPA, and while he didn’t like the new allocations, he couldn’t give me a specific code or legal reason things should be allocated differently. There we sat at a standstill waiting for one side to either give in or walk away blowing up the deal at the last minute.
But then I remembered a gentlemen I’d sat on a board with, for the International Business Brokers Association. As tax specialists go, I would call him the specialist’s specialist.
I called him, and 20 minutes later I had my solution. He pointed me to two different sections of the tax code and gave me the exact wording I needed to properly allocate things, per the law. The buyer’s legal and tax team quickly agreed that we were in the right, and we had our deal.
The takeaways are twofold. First, always work with specialists. You might have the best relationship in the world with your general practitioner, but if you need angioplasty, you go to a heart surgeon. Same goes for business.
Second, no matter what kind of service you need, be it roofing, home security, or M&A advice, there are typically advantages to working with someone who has credentials and pursues continuing education in their industry. (Take your doctor, for example. Do you want someone who has done surgery the same way for 15 years, or do you want someone using the latest in surgical robotics?)
I saved my seller $300,000 because I had a business relationship with the right person. I’d taken conference classes from this particular tax specialist, but I didn’t really get to know him until we sat on a board together.
When I really needed help, not only did I have this man’s number in my phone, but he took my call and gave me valuable advice, on the spot, without deferring me to his appointment book.
I gave back to my industry association. And through that, I gained a connection willing to do me a favor and help me save a $3 million deal.
So I ask you, first: Are you working with specialists? And second: What are you doing to become one yourself?
Scott Bushkie is Principal of Cornerstone Business Services, an M&A Advisory firm. To request a book with advice on the exit planning process, or to discuss other confidential options, contact Scott at (920) 436.9890 or [email protected].