How to Structure a Deal?

George Coultress is an M&A and Private Equity Advisor for Western Commerce Group. He specializes in investment banking, mergers and acquisitions, financial modeling, due diligence, and capital structure analysis. 

On this episode, George and Chris deep dive into the process of selling businesses. George details what sellers need to be thinking about, preparations to make internally, navigating multiple buyers, allocating risk, terms & contracts and so much more. George also breaks down industry nuances such as entity types, escrow, reps, warranties, and covenants. This is one of the most detailed insights into the M&A industry you'll find, enjoy!

Follow Chris on Twitter: www.Twitter.com/FortWorthChris

Learn more about Chris Powers and Fort Capital: www.FortCapitalLP.com

Follow Chris on LinkedIn: www.linkedin.com/in/chrispowersjr/

Watch this episode on YouTube: https://youtu.be/8I2BytNORzQ

(01:53) - George’s Career Since TCU and What He’s Doing Today

(02:54) - How is Western different from most investment banks?

(04:31) - What should someone selling their business for the first time think about beforehand and what expectations should they have?

(07:19) - What have people who are ‘really ready to sell’ already thought through?

(08:45) - What are the most important things outside of price?

(10:44) - Can most entrepreneurs make the transition to an employee?

(11:09) - What are the different outcomes post-sale for owners?

(12:45) - Do you work with owners who are looking to sell within the family?

(13:46) - What’s the process of deciding whether we are selling the business?

(17:26) - Do you and the seller usually know who’s going to buy the business?

(18:37) - How important is it that the seller has audited their financials before selling?

(19:42) - Who’s typically involved in all of these conversations in respect to confidentiality?

(21:19) - What happens between agreeing on the price of the business and finding a buyer that’s ready to go under contract?

(22:50) - How long does it typically take from going to market and signing with a buyer?

(23:27) - Structures and Terms of Contracts

(27:51) - Benefits Between C-Corp, S-Corp, and LLC

(31:50) - Allocating Risk in an Asset-Sales vs. Stock-Sales

(33:16) - Deal Structuring: Cash, Stock, Earn-out

(35:08) - What do sellers typically need to achieve in order to secure their earn-out?

(36:13) - How long do sellers typically stay on after a sell?

(36:34) - Non-Compete’s

(39:02) - Escrow

(40:15) - Reps and Warranties

(42:44) - Covenants

(43:31) - Is an earn-out the same as a seller note?

(44:32) - Is the purchase price found through a formula?

(47:39) - How do you talk to multiple sellers who are all extremely interested while maintaining a level of privacy?

(50:16) - What’s the marriage process of finding the ‘right’ buyer?

(52:04) - How do you know if you’ve found the right person?

(52:52) - What are things you can spot that are red flags in a deal?

(54:51) - Fee Structures For Investment Banks

(57:25) - Do you treat buyers differently based on their classification like family office, strategic buyer, or private equity?

(1:00:16) - What should seller’s ask PE groups to make sure they’ve checked all the boxes?

(1:03:18) - How often are you having to give attention to proprietary technology over EBITDA?

(1:06:00) - What’s a closing day usually like for the seller?

(1:08:14) - What’re your thoughts on the boomer generation selling market?

(1:10:01) - Could prices come down if there’s a flood of sellers?

(1:10:34) - What happens during a 1+ year relationship getting someone ready to sell?

(1:12:46) - What are you seeing in the labor market right now?

(1:14:26) - Thoughts on Supply Chain

(1:15:32) - If you could sit with Warren Buffet for an hour what would you want to talk with him about?

(1:20:26) - What advice would you give to young people getting into M&A and investment banking?

The FORT is produced by Johnny Peterson & Straight Up Podcasts