This webinar focused on the ins and outs of purchasing a business. The objectives of this webinar were to provide the attendees with tips and tools to use as a buy side party in a transaction. More specifically, the participants came away with a basic knowledge of how to approach and communicate with targets, how to analyze a target, the due diligence process, and what to expect at close and post-closing of a transaction. The presenters discussed the process from start to finish with a focus on the following areas: - What do you want to be and where do you want to go? – First step is to identify the type of business that best fits your overall business plan and strategy (culture, size, business lines, etc.). - Preliminary process – How to identify targets, use of professionals, development of a professional, and internal advisory team. - Transaction process – Initial discussions, development of an LOI, transaction type, and due diligence. - Closing process – Purchase document, delivery of assets or working capital, and final adjustments. - Post-closing – Now What?

2. Kurt Trimarchi
• CPA, CM&AA
• Managing Partner
• ktrimarchi@macpas.com
David Blain
• CPA, CVA
• Partner
• dblain@macpas.com
About Us

3. Webinar Agenda
This webinar will focus on key concepts in planning, preparing,
and completing the purchase of a business.
The webinar will focus on addressing:
• Business planning and strategy – what makes sense for your
business?
• The preliminary process.
• Transaction process.
• Closing process.
• Post Closing – integration matters.

4. The Why, What, and How
of Your Business Plan?

5. Why Are You Considering an Acquisition?
• Increase shareholder and market value of the current business?
• Improve cash flow and EBITDA results in order to allow for future
expansion and growth?
• Position the current business for future transition?
• Others?
The first thing that must be determined in any potential acquisition is
where it makes sense for the business as a whole. Answering the
questions around “Why” will help in that determination.

6. What Are You Trying to Accomplish?
After determining “Why”, you can then assess “What” makes the most
sense in the acquisition process. What are we trying to accomplish as a
business?
• Purchase market share?
• Add additional business lines?
• Fill excess capacity of plant or workforce?
• Expand regional and national presence?
• Others?

7. How Do We Plan to Accomplish this Goal?
The “How” of the process is determining how to accomplish the “Why”
and the “What,” as outlined in your business plan and strategy.
• Acquire book of business?
• Acquire existing business – facility and plant operation?
• Acquire specialized people, professionals, personnel?
• Acquire competitor to reduce competition?
• Others?

8. Other Considerations
As you go through this strategic planning process for your business,
some additional variables to consider in the process when identifying
an acquisition strategy are:
• Culture – What do I want the culture of my business to look like? How will
an acquisition impact my businesses culture?
• Size – While growth is the primary reason to have an acquisition strategy,
what business size is optimal and sustainable?
• Base Business – Never lose sight of the core of the business. Ensure that
any acquisition strategy does not impact the businesses “Bread and
Butter.”

9. Trust in the Process?

10. What’s First? Develop Your Team
Just like discussed in selling your business, the same holds true for
development of a team to acquire.
1. Third Party Support – Business/Transaction Advisory, Attorney, CPA/CVA.
2. Internal Team – Senior management, key operations personnel,
finance/accounting.
3. Other Trusted Advisors
Having the right team of professionals is key to a successful acquisition.

11. Identify Targets
• Research competitors.
• Dun and Bradstreet Data.
• Pratt Stats, IBIS World, other market data research organizations.
• Websites, social media, trade journals.
• Be inquisitive. Talk to others in the industry.
• Utilize trade groups and other business organizations.
• Trade Shows and Conferences.
• Business broker and other business selling sites.
• Others.

12. Preliminary Assessment
Once targets are identified:
• Plan to meet with your team of advisors, consultants, and internal
management to assess the viability of each target.
• Rank targets for purposes of determining most to least attractive for
the business.
• Assess contacts those to approach within the target business.
• Develop a tracking mechanism for recording of discussions,
communications, and other matters.

13. Ready, Set, Go!

14. Initial Discussions with Targets
1. Discuss intent – What you are looking to accomplish?
2. Determine Interest – Is the target actively positioning the
company for sale or is interest in selling new?
3. Outline approach to process.
4. Leave interested discussions with specific next steps in the
process.
a. Basic financial review.
b. Tour of plant or facility.
c. Understand operations.

15. Indication of Interest (IOI)
• Written correspondence indicating to the target interested in purchasing the
business.
• Typically correspondence is a high level document outlining interest as well as
how the structure of the deal might look like.
• Outlines type of deal (Asset or Stock).
• Outlines how the value of the business will be assessed
(Adjusted EBITDA, Market Multiples, etc.).
• Outlines how working capital will be assessed.
• This document tends to not outline specifics of value but provide a frame
work for how the deal will be assessed and a possible range of value.
• Helps to “align” thoughts between buyer and seller.

16. Letter of Intent (LOI)
• Typically Non-Binding Documents.
• Require Non-Disclosure Agreements to be signed before formal
due diligence begins.
• Document will outline the specific provisions of a proposed
transaction structure to be followed by both parties.

17. Letter of Intent (LOI) (cont’d)
This document will outline specifics of a transaction.
• Purchase Price.
• Agreed Upon EBITDA target for Trailing Twelve Month (TTM) period.
• Multiple of EBITDA.
• Working Capital Requirements.
• Deal Type – Asset or Stock Deal?
• Sources of funding.
• Timing of due diligence, post closing, and closing.
• Legal provisions and other matters.

18. Due Diligence/Quality of Earnings
• Verification process
• Financial
• Operations
• Sales
• Similar to an audit but not quite the same
• Use of more judgement then following set procedures
• Requires flexibility in the process
• Goal of the process is to ensure what has been represented is accurate
TRUST BUT VERIFY

19. Due Diligence
• Accounting and Financial
• Tax
• Contracts and Agreements
• Customers and Vendors
• Employees
• Legal and Regulatory
• Environmental
• Litigation
• Personnel
• Payroll and headcount
• Employee Benefits
• Other matters – Union

20. Due Diligence (cont’d)
• Insurance
• Intellectual property
• Political/PR risks
• Asset schedules
• Real Estate
• Other assets
• Other industry specific matters

21. Let’s Close This Deal

22. Final Adjustments and Negotiation
• Discuss and negotiate any adjustments to EBITDA or other assets
noted during the dues diligence process.
• Finalize agreement on delivery of average working capital
requirements and other required assets outlined within the
transaction.
• Finalize any remaining open items or issues noted during the due
diligence process pertaining to other operating and legal matters.

23. Purchase Document
• Outlines the specifics of the transaction based upon the LOI and
any adjustments noted within the due diligence process.
• Outlines all legal requirements of both parties regarding the
delivery of assets, intellectual property, contracts, personnel, etc.
as well as final agreement of consideration and delivery thereof.

24. Purchase Document Specifics
• Outlines parties involved in the transaction.
• Definitions.
• Outlined assets to be sold.
• Purchase price.
• Closing process and procedure.
• Payment.
• Sellers and buyers conditions precedent and representations and
warranties.
• Other general legal provisions and governing law.

25. We’re Done. Now What?

26. Post-Closing Transitional Matters
• Most deals do not contemplate what happens after all purchase
documents are signed.
• In order to ensure all EBITDA and earnings targets are achieved, having
a plan in place to quickly transition the business is key.
It is Here Where Good Deals Can Turn Bad

27. Matters to Consider Post Close
• Communication
• Internal – Staff, personnel, management
• External – Vendors, suppliers, customers, external market place
• Operational integration
• Financial integration
• Beginning balance sheet
• Operation accounting
• Metrics
• Other specific matters

28. Kurt Trimarchi
• CPA, CM&AA
• Managing Partner
• ktrimarchi@macpas.com
David Blain
• CPA, CVA
• Partner
• dblain@macpas.com
Questions?