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2016 Off to a Strong Start

Sunbelt New Mexico Business Brokerage Activity for January 2016

“5 Secretly Cool Places” – Albuquerque

Sandia Mountains Tramway approaching the peakThe Huffington Post celebrates Albuquerque as one of the five “secretly cool destinations.” Decrying the era of the few select trend-setting cities over, travel writer David Landsel advises, “Anyone looking for the trappings of life normally found in an anointed cool capital need no longer set their sights on those high-profile, increasingly expensive cities. At a time when many of the people living in said cities are wondering, where to next, take a look at these five secretly cool destinations.”

Read the full article at “O, Pioneer! 5 Secretly Cool Cities Where You Can Still Get in on the Ground Floor.




Funding Your Business Purchase with Your 401(k)

Roll-Over as Business Start-Ups, or “ROBS” as they have come to be known, is a funding mechanism that allows you to access the proceeds in your 401(k) plan or other retirement funds to start or purchase an existing business or a pre-approved franchise.

The advantage of a ROBS is that it allows you to reduce or eliminate your debt when you seek to start of buy a business. But there are downsides as well. Violating IRS regulations can result in a significant tax penalty. Even when you’re 100% compliant with the IRS, a risky business venture could jeopardize your nest egg.

As with anything in which the IRS is involved, compliance matters. We strongly encourage you to work with an experienced attorney, CPA or lender that specializes in this type of financing. They will fully explain your obligations, see if it makes sense in your specific instance, and handle the structuring of the deal. We can recommend several.

While your advisors will be dealing with the nuts and bolts of the transaction, here are the basic highlights of how such ROBS are structured. Remember: the devil is in the details.




Do You Have an Exit Plan?

“Exit strategies may allow you to get out before the bottom falls out of your industry. Well-planned exits allow you to get a better price for your business.”

From: Selling Your Business by Russ Robb, published by Adams Media Corporation

Whether you plan to sell out in one year, five years, or never, you need an exit strategy. As the term suggests, an exit strategy is a plan for leaving your business, and every business should have one, if not two. The first is useful as a guide to a smooth exit from your business. The second is for emergencies that could come about due to poor health or partnership problems. You may never plan to sell, but you never know!

The first step in creating an exit plan is to develop what is basically an exit policy and procedure manual. It may end up being only on a few sheets of paper, but it should outline your thoughts on how to exit the business when the time comes. There are some important questions to wrestle with in creating a basic plan and procedures.

The plan should start with outlining the circumstances under which a sale or merger might occur, other than the obvious financial difficulties or other economic pressures. The reason for selling or merging might then be the obvious one – retirement – or another non-emergency situation. Competition issues might be a reason – or perhaps there is a merger under consideration to grow the company. No matter what the circumstance, an exit plan or procedure is something that should be developed even if a reason is not immediately on the horizon.

Next, any existing agreements with other partners or shareholders that could influence any exit plans should be reviewed. If there are partners or shareholders, there should be buy-sell agreements in place. If not, these should be prepared. Any subsequent acquisition of the company will most likely be for the entire business. Everyone involved in the decision to sell, legally or otherwise, should be involved in the exit procedures. This group can then determine under what circumstances the company might be offered for sale.

The next step to consider is which, if any, of the partners, shareholders or key managers will play an actual part in any exit strategy and who will handle what. A legal advisor can be called upon to answer any of the legal issues, and the company’s financial officer or outside accounting firm can develop and resolve any financial issues. Obviously, no one can predict the future, but basic legal and accounting “what-ifs” can be anticipated and answered in advance.

A similar issue to consider is who will be responsible for representing the company in negotiations. It is generally best if one key manager or owner represents the company in the sale process and is accountable for the execution of the procedures in place in the exit plan. This might also be a good time to talk to an M&A intermediary firm for advice about the process itself. Your M&A advisor can provide samples of the documents that will most likely be executed as part of the sale process; e.g., confidentiality agreements, term sheets, letters of intent, and typical closing documents. The M&A advisor can also answer questions relating to fees and charges.

One of the most important tasks is determining how to value the company. Certainly, an appraisal done today will not reflect the value of the company in the future. However, a plan of how the company will be valued for sale purposes should be outlined. For example, tax implications can be considered: Who should do the valuation?  Are any synergistic benefits outlined that might impact the value?  How would a potential buyer look at the value of the company?

An integral part of the plan is to address the due diligence issues that will be a critical part of any sale. The time to address the due diligence process and possible contentious issues is before a sale plan is formalized. The best way to address the potential “skeletons in the closet” is to shake them at this point and resolve the problems. What are the key problems or issues that could cause concern to a potential acquirer? Are agreements with large customers and suppliers in writing? Are there contracts with key employees? Are the leases, if any, on equipment and real estate current and long enough to meet an acquirer’s requirements?

The time to address selling the company is now. Creating the basic procedures that will be followed makes good business sense and, although they may not be put into action for a long time, they should be in place and updated periodically.