Tips and Thoughts About Selling Your Business: Part II
Thinking about expanding your business through an acquisition - or selling it because of retirement, market conditions or to reach the next stage of growth - can feel overwhelming. As a business and finance attorney, over the years I’ve worked as both general counsel and M&A counsel for companies of all shapes and sizes, and I’ve seen firsthand what helps an owner get ready for a successful sale (and what can unintentionally get in the way). Through this Q&A series, I will share practical, real‑world advice from those experiences, so whether you are buying or selling, you can navigate the process with fewer surprises, and greater clarity and confidence.
Q: What are some of the critical preparations, beyond accounting, that I should consider when preparing to sell my business?
A: There are many, but one that sellers often are reluctant to undertake is the environmental assessment of one’s plant and facilities. I recognize that not all businesses own real estate or handle hazardous materials. But even companies that lease space need to be able to answer a buyer’s inquiry about what activities historically have been performed on that site, who owns and controls the real estate and buildings, what activities have been conducted on the premises, what the current uses and activities conducted on site are, and whether any hazardous materials have migrated onto a seller’s property from off-site neighbors.
In preparing your business for sale, you should engage with a licensed environmental professional well before the sale process begins. A Phase I Environmental Site Assessment can often be conducted and can answer many of the questions a buyer will ask. In some instances, more in-depth site testing and sampling are required when a Phase I identifies potential areas of concern. But regardless of the jurisdiction you are in, a seasoned buyer will require a seller to assume the post-closing risks of environmental liability. So, a smart seller will want to fully characterize what potential risks exist on those business premises.
This knowledge is critically important whether or not you use environmentally sensitive or hazardous materials in your business or manufacturing processes.
Unprepared sellers who finally realize the implications associated with an environmental review will stop a sale mid-discussion or delay a closing to digest the environmental realities associated with their operation.
Having the right professional supporting this inquiry will allow for a sale transaction to run more efficiently without interruption or delay.
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Read other installments in the series: