Mergers and acquisitions are big events for various parties including the seller, buyer, company employees, and the legal team. On today’s show, Domenic Rinaldi focuses on the seller and talks to Joseph Beer, the Vice President of Operations at Sun Acquisitions, LLC, about the seller’s responsibility during the M&A process. Joe explains some best practices for sellers that they need to think about before putting their business for sale as it relates to diligence.  He highlights on confidentiality as a crucial factor during an acquisition and stresses on continuously assessing buyers. Given the complexity of the entire M&A process, Joe also notes the importance of selecting the right attorney.

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Mergers And Acquisitions: Best Practices For Sellers With Joseph Beer

We have got a special guest for you. We are going to be joined by Joe Beer. Joe is the Vice President of Operations for our mergers and acquisitions firms on acquisitions. He is responsible for overseeing the closing coordination for all of our deals in Sun Acquisitions. What I mean by that is when a buyer and a seller agree to terms, whether it’s in an LOI or a term sheet or whatever it is, the deal gets handed off by the advisors over to Joe and then he coordinates the process through to the closing. He manages the data room and he oversees the diligence. While he doesn’t do any of the due diligence, he oversees it. He’s the project manager. At this point in time, Joe has done a couple of hundred deals. He’s an expert at what he does and in the course of his career with us, he’s learned a lot and he has seen a lot. I’m so excited to have him share with you some of the key things that sellers need to think about before they put their businesses on the marketplace as it relates to diligence. We’re going to be focused on sellers. We’re going to do another interview and we’re going to focus on buyers and what buyers should think about. We’re going to focus on sellers. Joe, I’m happy to have you here.

Thanks for having me, Domenic.

Joe, why don’t we start off with giving everybody a quick background on yourself, what you’ve done and your education?

I have a law background. I wanted to be a lawyer since the time I can remember. I ended up going to law school and focusing on business and entrepreneurial law. I got my business certificate in business law at Chicago, Kent. After I graduated, I worked for a couple of different law firms, one was focused on entrepreneurial startups and another that’s focused primarily on finance and banking. I found my way to Sun Acquisitions and I’ve been working for Sun for a few years now.

We’re glad you found your way here. If I remember correctly, I had put a notice out on some bulletin that got through to the law schools and you happen to see it as an alumni and the rest is history.

That’s very accurate. I was trying to break into the M&A space. I wasn’t sure what I wanted to do. I thought it would be a good opportunity, a great way to learn the business and it has been.

You do a tremendous job in all of our deals. I know clients, time and time again, applaud all your efforts and knowledge. Having the law degree, even though you’re not acting as a lawyer for anybody in the transaction, but having that degree helps you quite a bit in the process. Our clients can leverage all of that experience and knowledge. Joe, let’s dive in. We’re going to talk about sellers and the things they should think about. I often say to people the time to be thinking about diligence is well and advance for putting your business on the market. You should be running your business when you start thinking that you might sell it. Start putting the business in order. Let’s start with what are the best practices from a seller’s perspective as it relates to getting through due diligence in a deal?

I like to break it down into five basic key components. The first of which and one of the most important is to understand what the requirements are. eller should have a good firm understanding of what the timing is going to look like and what the expectations are going to be for them as they make their way through due diligence. Buyers are going to have expectations of them if there’s a lender involved, their lenders will have expectations. The biggest surprise to some of these sellers coming into it is how much time it takes to get through due diligence. The level of document and information production that they’re going to need to put forth in order to complete and satisfy due diligence from both a buyer’s perspective and from their lenders, financers or whoever else is involved in the transaction.

I interviewed Jay Myers, who is the owner of a business down in the South. During the course of our interview, he brought up how overwhelming diligence was for him, all the document production that needed to happen. In the course, he had to continue to run his business. Luckily, he had a good right-hand person that was there to run the business. If that person wasn’t there to run the business day-in and day-out and he had to produce all those documents, it would have been very difficult to operate that business and do all of the diligence or respond to all of the diligence requests at the same time.

It’s not always possible. Luckily, in that guy’s case, he had someone that could run the day-to-day. For those sellers that don’t have that right-hand person, they’re going to have to be engaged in the due diligence as well as running their business on day-to-day. That’s why it’s so important to be able to set aside time. To the extent you have good habits early on, you’re going to reduce the time necessary. It’s staying organized from the beginning. If you’re thinking about selling three years down the road, it’s never too late to start putting together records, getting organized, figuring out what you need so that you can hand a nice package over to whoever your buyer ends up being.

Confidentiality is an absolute critical part to maintaining the health of the business throughout due diligence. Click To Tweet

Let’s talk about how you help clients early in the process with the document creation and the data room. How can we help them get ahead of the curve before we’re faced with their backs up against the wall and they’re in diligence and they’re having to produce documentation?

The best thing that we can do is start building that due diligence workspace out as early as possible. To the extent that we can get stuff in there, get documents in there and information ahead of even having a buyer in the door, we’re going to be doing ourselves a huge favor. As a firm, we have software that we work with and use to get everything securely up on a data site. It’s more than just a Dropbox. It’s a secure site and it’s password protected. The files are organized in terms of group and subgroup so that it’s easy for buyers to come in and see all the documents. Not only that, we’re able to go in and see what’s been done so we can track what each buyer has done when we do start to get buyers in the door. Getting those documents early and being able to organize them in a clear, concise fashion is critical and tantamount to having a smoother due diligence process as possible.

I know you work with the advisors early on and you have a checklist that’s a starting point. It’s certainly not everything that’s going to be needed and every buyer is different. Some buyers may want one thing and others might want another, but you have a checklist that you get people started with and you can easily start to tick off a lot of those requirements.

Each buyer is going to be a little bit different, but we do have a good understanding of what they’re going to need. The three years of financials, three years of tax returns, sometimes more possible less but that’s the benchmark. We always want to make sure that we’re anticipating to the best extent we can what buyers are going to ask for. It goes well beyond the financials. We’re looking at what legal documents are needed. Material contracts, we’re going to want to get those up on the site as far as operations go. Asset lists, employee roster, org charts, all of that, you want to have up on the site on day one, so buyers can come in and have a good understanding of what the business is. The added benefit to that is it reduces the likelihood that you’re going to have a renegotiation later down the line when you have everything up front on day one.

For business owners, what we like to do is the day we engage with a client, we like to start building that out. We’re not even in the marketplace talking to buyers, but we’re building out the data rooms so that we’re ahead of the curve. I’m sure some people out there reading are thinking you’ve got all this information, when and how are you releasing it to perspective buyers? We should talk a little bit about that and how confidentiality plays into all of this.

Confidentiality is a critical component of any one of these deals. Before anyone sees anything, they’re going to have to sign a confidentiality agreement. They’re going to have to be properly vetted, make sure they have the financial wherewithal to get the deal done. Confidentiality is an absolutely critical part of maintaining the health of the business throughout due diligence. Even for the transition once the buyer assumes the role. Our recommendation on confidentiality is it’s a need to know basis and you should keep the circle as tight as possible. Inevitably as you get down the road in due diligence, you have more people that need to find out about the deal by virtue of what type of business it is. If there’s a license involved, you’re going to have a government application. If there’s landlord involved or at least, you’re going to have to let the landlord know. What we try to do is hit each one of those targets at the right time so that we’re not divulging the sale too early to any one particular party.

We’ll come back to confidentiality, but let’s stick to the data rooms. For M&A Unplugged community, if you’re a business owner and you’re reading, the release of the information in the data room, even though you may be loading it in early, it’s to make sure that you’re not overwhelmed once there’s a buyer that shows up and you have an accepted offer or you have an indication of interest and it looks like there’s more discovery that’s going to be needed. It’s so you have plenty of time to build that out. You’re not under the gun. You can always decide how and when you want to release the data. You might not release all of it. You might release a subset of it. You’re always in control of what gets released.

At some point in time, you’re going to have to release the whole data room in order for somebody to do their diligence. The idea behind building out the data room and building it out early is so that you’re not under the gun and you have plenty of time to put it together in a thoughtful fashion. The second reason is when a buyer shows up, it helps them go fast. You want buyers to go fast because you don’t want deals to delay. Once there’s a delay in deals, all sorts of bad things can happen. It’s important that the buyers be able to go fast and we figure out if they’re real or not.

What’s great about the software that we use is it’s completely flexible in that regard. We organize it by folder and subfolder and then group and subgroups. We’re controlling what gets released at what time. It’s not an all or nothing thing. What you’re getting out there is we can start slow and we often do, but once we have the right buyer lined up and the confidentiality agreement is signed, then we’re ready to go and release everything. It makes for a much smoother process and much easier for both sides to focus on reviewing the documents instead of gathering the documents.

You hinted on confidentiality. You talked a little bit about what’s going to be required from a buyer before they get to see anything. Let’s talk about the mentality of confidentiality. You and I have been doing this for a long time so we both know that we have people who don’t want anybody to know, which is the best practice. There are people who are a little bit looser with that and there can be lots of issues depending on how they approach that. Let’s talk a little bit about confidentiality and why it’s so critical and how to approach it if you’re the owner of a business.

MAU 33 | Best Practices For Sellers

Best Practices For Sellers: Getting documents early and organizing them in a clear, concise fashion is critical for a smoother due diligence process.


The idea is to keep the circle as tight as possible. The more people that know, the more opportunity you have for something to go wrong, for someone to leave if they feel that they have to leverage something. If employees are to find out early on, their next thought is what does it mean for me? You don’t want people to focus on their job security or what’s next for them. You want them to focus on their jobs. The best thing you can do for your company if you’re an owner is to keep confidentiality as tight as possible. Those who need to know are mostly the owner and the advisers if they can help it.

To expand upon that point, Joe hinted to it here that you don’t want people worried about and thinking about what’s next. The issue with this is the employees will start to ask questions. Naturally, everybody’s curious. Most of the questions that they will ask you, you cannot answer or you can’t answer honestly because you yourself don’t know the answer. The problem when you can’t answer a question for an employee, it leaves them in flux and now they’re left to wonder. When people are left to wonder, they create an alternate reality that is not accurate. They do it because there’s an absence or devoid of information. That devoid of information will lead to anxiousness. When they’re anxious, they’re going to start to worry about themselves.

When they worry about themselves, you now have put the business at risk. There’s jeopardy there that people will start to look for other jobs. They have mortgages, tuitions, whatever they have. They have obligations and they’re going to go worry about those things. They’re going to try to take care of themselves. If they leave before the sale of your business, it’s guaranteed the value of your business goes down, especially if they’re key employees. You need to protect not just your business, but you also need to protect the emotional state of your employees. Not telling them is protecting that emotional state. Joe, let’s move on from confidentiality. What other best practices do you have that would be important for business owners to understand?

Hiring the right advisors is important from the get-go. You want the right people involved from the start, whether that’s an accountant or an attorney or whoever else. You want to make sure that they have all the facts. The earlier you get them involved, the better off you are because they will know all the issues upfront, which is a subset of my next point which would be to disclose any issues. If you have issues, if there’s a problem, if there is an employee issue, safety issue, anything within the last few years that could and likely would come out during due diligence. You want to make sure that you can get ahead of those issues and have a good explanation for them. That starts with hiring the right people, getting them involved and getting advice from that circle of advisors.

There’s no such thing as sweeping something under the rug and having it go away permanently. It’s only a matter of sweeping it under the rug until the rug is pulled up and it’s discovered. You don’t want that to happen after you sell the business because that will lead you down the path of lawsuits and all sorts of bad things. If there are material things that are happening, you need to disclose it sooner rather than later. Don’t ever think that withholding some material piece of information is going to sugarcoat what’s going to happen later on because it isn’t. It’s going to make matters worse. Joe, in that regard, didn’t you have a situation where there was a material issue as it related to a key employee leaving and you did a great job getting ahead of that.

Getting ahead of these issues is crucial. The deal you’re referring to, we happen to know that one of the key employees was on the fence about sticking around and that was not going to work for any new owner. The reason being is he happened to be the son of the owner and felt that he would be entitled to the business. The owner went out to the market to sell it. Because we knew that was a potential issue and it had been disclosed to us, we were able to counsel the seller, have him find a replacement for this key employee. At the end of the day, the buyer knew about it, the seller knew about it, everyone was comfortable because we went out and found a replacement who could take over that key employee role.

What was so great is you incorporated the buyer into the thinking process. He wasn’t in the dark after the initial shock of realizing he was going to lose a key employee and realizing it’s not such a bad thing. He became part of the solution, which was tremendous. It was a material issue and it needed to be disclosed and it was a great way to handle it.

Elaborating on that, the key is you don’t want issues to come up after close, but you don’t want issues to come up during due diligence either because in that regard, your buyer is going to think you’re trying to hide something. In terms of process, get good advisors, get good advice and then disclose issues so that they don’t become problems in due diligence or after you close.

Do you have any other examples out there of deals that were in diligence where it went well or there was a key lesson learned that our audience can pick up something from that?

There are more than a few bad ones and good ones out there for sure. The ones that come to mind that were particularly well was a staging company that we sold. In that particular case, this goes back to the preparation and the timing. This seller was a husband and wife selling us a home staging company. They knew that they had to focus on both running the business and selling it. It didn’t matter what the buyer asked of them, they made it work. Even if it took them an entire weekend, even if it took them all night, if the document was requested, a report was needed, they were on top of it. That deal went very smoothly, as smoothly as these deals can go. The deal closed with little issue. In that case, when you’ve budgeted time and you’ve set your mentality that you’re going to do this, it makes a world of difference. I guess there’s a good story for you.

The right M&A attorney is someone who has commercial real estate background, spent more time in court, and has time for you. Click To Tweet

The two ones that we pointed out where they went well, somebody had help. Sometimes people underestimate what this phase of a deal is going to take. Getting ahead of it early matters especially if you don’t have the help.

A lot of owners underestimate or take for granted the amount of knowledge they have about their own business that other people don’t have. Sometimes they don’t understand how much time a third party is going to need to analyze it. They forget that they have 10, 20, 30 years of experience running this business and now you have a buyer that’s trying to come in and learn it and 30, 45 or 60 days. The imbalance in the knowledge there makes a difference. For owners who can’t grapple with that, it’s sometimes difficult for them to understand, “Why are you asking that? That seems obvious to me,” but it’s not obvious to other people.

It’s important for somebody to validate what their suspicions are. They have every right to that in the diligence process. They have to get comfortable or they’re going to pull away from the deal.

It’s trust but verify.

What about banking? As we know almost all deals have some bank financing. It’s very rare that somebody coming in and writing a check for business. It almost never happens. The buyer has to go to the bank and go through underwriting with the bank. What should the business owner understand what the buyer has to go through? What should they do to help make that process easier and simpler and faster? 

A fair number of the deals that we work on have an SBA backed finance component, but most of these deals are bank financed. No one’s coming with a pile of cash. The sellers should understand that the bank has its whole set of questions and documents independent of what the buyer’s doing. A lot of the time, those line up nicely, but the bank may ask for more. It may ask for less. If they’re subject to SBA guidelines, if it’s an SBA-backed loan, they have certain protocols and procedures they need to follow. They’re going to definitely require three years of financials. One thing that sellers sometimes struggle with is even when it’s not SBA, a lot of banks want to see the buyer put together a set of projections. They want to see 24 months’ worth of projections on a monthly basis, not just on an annual basis.

In order to do that, most buyers want to go back 24 months and have 24 months’ worth of data from the seller and on a monthly basis. Not just annual tax return or quarterly but they want to see month by month so that they can look to see, is there seasonality to the business? What are the ebbs and flows? It’s so they can put an accurate 24-month, 36-month or 12-month projection together for their lender. In addition to that, they’re going to want to see what’s in the pipeline. What’s coming up so that they can get those first few months accurate? There are all these little additional items that are required. As we talked about, you need three years’ worth of financials, but sometimes you need them on a monthly basis.

Every bank is different too. Some banks have some requirements and others are slightly different, so being nimble matters.

You never know what until you get your buyer and they line up their financing source. Being nimble is crucial. You need to understand that you have to be flexible, you have to have good advisors, good accountants, especially accountants in the early stages because a lot of the time they’re the ones pulling these records. You got to make sure that they understand what the time requirement is and what the commitment to getting the deal completed or at least getting through due diligence is going to be.

Let’s talk a little bit about landlords. If I had $1 for every time somebody told me that they had a great relationship with their landlord and there was going to be no problem getting a new lease or an extension, I’d be retired. What advice could we offer up to the community? By the way, that is not a backhanded slam against landlords. They do what they need to do. It’s not as straightforward as people might think. What do people need to know about the landlord? What’s the right timing for approaching your landlord?

MAU 33 | Best Practices For Sellers

Best Practices For Sellers: Every landlord is different like every deal is different.


Every landlord’s going to be different like every deal is different. You’re going to want to make sure that your relationship is good with your landlord. If you can make sure of that. Not everyone is talking to their landlord every single day, most people aren’t. Hopefully, that wouldn’t be a problem. As far as the timing goes, I always say it’s more about the tasks being completed than it is about the actual length of time. In terms of disclosing a sale to the landlord, you want to make sure that you’ve got a buyer that’s substantially, if not completed with their financial due diligence review that is well on their way if they’re getting financing to being either in the underwriting process or having the deal approved by the lender that they’ve chosen. Having at least a first draft of the definitive purchase agreement, if not, somewhat negotiated and completed or ideally completed or signed. You want to have a few milestones lined up before you’re going to talk to the landlord. The worst thing you can do is having a perpetual state of conversation with your landlord about the next buyer and the next buyer because they will ultimately lose confidence in the business. You don’t want to put yourself in that jeopardy.

I get asked this question a lot too about the perception that most buyers look to lock up a deal and then they re-trade it somewhere along the way. You and I both know that that’s not the case. Let’s talk a little bit about when it is the case and how to avoid it.

There are going to be buyers out there who are going to try to do that. By and large, the best thing you can do is try to filter through those buyers and filter them out of the process early if you can detect that that’s what’s coming. It’s not always possible but if you can, you eliminate the problem there. That all goes back to the disclosures. If you can get everything or as much as you can to disclose upfront the financials, taxes, documents, you will minimize the buyer’s ability to leverage an issue. You don’t want them to come and say, “Why is cashflow down? Why our revenues down?” Getting all of that upfront and current too, you want to make sure that you got your own financials up there early because if you have lower revenues than you thought, that’s a leverage point for a buyer that you want to avoid. Disclosing is the name of the game.

Is it fair to say that? In my experience and I’m sure in yours, most buyers are not looking to re-trade the deal. It’s pretty rare that we come across buyers who what I would call sharks in the tank. They try to lock up a deal and then spend some time in it, get the seller enamored with the process and then re-trade it. That doesn’t happen that often. More than likely, it’s some material issue that pops up that causes the buyer to take a second look at all the assumptions that were made upfront when they made the offer.

Most of the buyers we deal with are serious buyers who are looking to verify the assumptions that they’ve made about the business. I would agree with you that it’s a rare situation where you have a buyer come in that wants to employ that specific strategy of locking up the deal for a period of time. For most of these buyers that are truly motivated, it’s too risky of a strategy especially if it’s a strong business with good performance. The seller is capable most of the time of moving on to the next buyer. You don’t see that all too often.

What I would say to the owners is when you’re first meeting with perspective buyers, they’re going to ask you a lot of questions. They need to understand your business and get to know you, but you shouldn’t be shy about trying to figure out who they are, their character, what deals they’ve done in the past, if they’ve done deals in the past. You’re going to get a good sense of the type of person that you’re going to be working with and you’re either going to feel comfortable or not. That should go into your decision making when you’re trying to look at various offers and decide who are the best buyers. Don’t be afraid to interview the buyers back even though it’s their opportunity to do discovery on you and your business.

The terms and conditions in the price are all very important, but almost as important is who can get to the finish line, who’s going to close the deal and not waste your time and who’s a good fit for the business. That matters because that person is going to be entrusted to carry on the legacy and continue employing the employees. All those things matter as you make your way through due diligence. I don’t think people should ever stop assessing that. The early stages as you talked about where you’re meeting with buyers, doing site visits, each party is trying to figure the other one out. That’s a critical time in selecting who’s going to be the best candidate to get through due diligence.

As an attorney yourself, when you’re talking to owners, what advice would you give to them about selecting the right attorney to handle their business for sale transaction?

The two most important factors in my mind do they have the right knowledge and expertise in the area of focus which is mergers and acquisitions. Preferably if there’s real estate involved, if there’s a lease, they have some commercial real estate background. You want someone that has a focus on this. This is one that I always use, ask an attorney how much time they spend in court and if the answer is anything but zero, that’s not the right M&A attorney for you. I like using that one because most attorneys like to brag about how much time they spend in court. Make sure that they have the knowledge base and the background.

The second most important thing is to make sure they have the time for you. Do they have the time and resources? Is it the right firm? Do they have someone to back them up if they’re out of town or they’re not available because the timing is critical? You can lose time with the attorneys as I’m sure most people know. Losing time will inevitably lead to some deals dying when they otherwise could have made it. Having the right attorney is someone that knows the M&A process and has the time for you and has the bandwidth.

MAU 33 | Best Practices For Sellers

Best Practices For Sellers: Prepare your business for sale means maintaining good records and becoming as organized as you possibly can.


Any parting comments or even a story that you’d like to share with the M&A Unplugged community?

As far as comments go, I would say it’s never too late to start your good habits. If you’re thinking about selling a month from now, three years from now, whatever the case may be, you want to make sure you’re doing your best to prepare your business for sale and moreover to prepare it for due diligence. That means maintaining good records and becoming as organized as you possibly can be because that organization will serve you very well down the line.

We’re going to have you back. You and I have to talk about schedules and figure out what’s going on. I know you’ve got a ton of deals in diligence. We’ve got a ton on the plate, but I want to get you back so we can talk about the buyers and take it from the buyer’s perspective. I thought this was great information and I always appreciate your time.

Thanks, Domenic. I appreciate you having me on.

M&A Unplugged community, let me recap a few things that Joe brought up that are the highlights. Number one, diligence is going to require a lot of time and effort. The earlier you start collecting all the documents that are going to be needed for diligence, the easier the process is going to be for you, the faster it’s going to be for the buyer and more likely, you are going to have a successful outcome. It’s so important that while you are selling the business that you stay focused on the business. The last thing you want to be doing is have your attention distracted because you’re having to pull documents and do a lot of things in diligence and the business is going to suffer. That will come out and could potentially harm the value of your business.

Confidentiality is critically important. Our best practice, our best advice here is to tell no one. Tell as few people as possible. No one is best because you need to protect that for everybody’s sake, not just for yours and the value of the business, but for your employees as well. The last thing, advisors is critically important. Having the right advisors who have significant M&A experience will make the difference in the outcome for you and minimize the post-transaction risks as it relates to your business. If you would like to learn more about the process of acquiring or selling a business, please visit our website at or feel free to reach out to me at [email protected]. I look forward to seeing you again in the next episode. Until then, please remember that scaling, acquiring or selling a business takes time, preparation and the proper knowledge.

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About Joseph Beer

MAU 33 | Best Practices For SellersJoseph Beer joined Sun Acquisitions in 2013 after working for a mid-sized law firm focusing on banking and financials services and corporate transactions. As Vice President of Operations, Joe is responsible for managing all aspects of the business transactions process.

Joe works closely with buyers and sellers as well as their accountants, attorneys and lenders to help ensure that deals make it to the closing table as timely and efficiently as possible. Joe has vast experience negotiating contracts including purchase agreements and commercial leases.

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