Is Your Company Ready to Sell?

November 2, 2013 by

As a business owner, it is never too early to begin preparing your business for a sale. Even if you are years away from selling, owners should avoid making mistakes now that can potentially delay or kill a future M&A transaction, or reduce the purchase price. The below list is not exhaustive, but representative of the most damaging pitfalls business owners should take steps to avoid.

  • Finance and Accounting. A potential buyer will almost certainly require a thorough examination of the financial statements and accounting records of the company. When owners omit transactions from financial statements, when personal transactions are run through the business, or when lenders’ security interests are too broad and all-encompassing, potential buyers will likely renegotiate terms or walk away.
  • Stock (Equity) Ownership. In a sale of the equity of a business (stock / membership interests), the potential buyer will examine the seller’s capital structure to attempt to spot certain issues that may create risk for the buyer post-close. Among other things, a potential buyer will scrutinize:
  • Employee Issues. Potential buyers may have issues with any of the following issues related to a company’s employees:
    • Key employees have not signed non-competition / non-solicitation agreements.
    • Employees have not signed confidentiality agreements protecting trade secrets and intellectual property.
    • The company has promised key employees equity but no documentation exists.
    • Stock options to employees were done incorrectly.
    • Immigration laws (if applicable) were not followed.
    • OSHA requirements not followed.
  • Third Party Contracts. Buyers are also wary of third party contracts that contain the following provisions:
    • In an asset sale, Anti-Assignment Clauses in contracts make it difficult to assign contracts to the buyer post-closing.
    • Exclusive contracts (territory, customers, licensing technology) may unnecessarily restrict the company.
    • Lopsided provisions regarding damages, non-competition, or indemnity.

Although avoiding the above pitfalls will not guarantee you a successful sale, it will go a long way to maximizing your chances of a successful transaction.


Founded in 2010, Brown Fox is a business boutique law firm focused on serving businesses, executives and entrepreneurs in practice areas most commonly needed to advance business growth, manage risk, and defend from attack. The firm’s representative clientele includes companies ranging from start-ups to publicly traded companies. The firm has offices in Dallas and Frisco.

Best Lawyers recently named Brown Fox a Tier 1 Best Law Firm for a fourth year in a row, Chambers & Partners has recognized the firm as a top small to midsize firm in all three of its Regional Spotlights, and Inc. 5000 has twice recognized the firm as one of the Fastest Growing Private Companies in America. The firm’s attorneys have garnered over seventy Super Lawyers & Rising Stars honors, several Best Lawyers honors from both D Magazine and Best Lawyers in America, among other honors.

Character Matters® is the firm’s foundational maxim; its core values of integrity, servant leadership, excellence, and impact are its roots. Brown Fox is committed to aggressively and creatively representing our clients, while staying true to the firm’s guiding principles. Learn more about Brown Fox by clicking here.


Integrity-Driven Advocates, Problem Solvers, and Counselors Ready to Serve.
Meet Brown Fox