Business/Mgmt & Tax Concepts

Case Study: Adding Value in a Business Transaction

March 9, 2020

[Please note: to protect our clients’ privacy, we have changed the names and identifying information of the parties involved.]

One of our clients — let’s call her Yvonne — was ready to sell her business. At the age of 40, she wasn’t going to retire, per se, but she was ready for this chapter to come to a close. Yvonne had built a wildly successful business: a firm in the retail services industry with $2 million EBITDA, $8 million in annual revenue, 35% annual growth, and high profit margins. In our early discussions about the sale, she posed the following questions to us:

  1. How do I best prepare and position myself in the marketplace?
  2. My company has assets in all 50 states — is that going to be a factor during the sale?
  3. How do I even begin to figure out how much my business is worth?

We love getting questions like these because it means that our clients are thinking about this as strategically as we are. Luckily for Yvonne, we had the perfect team in place to help her address each of her questions.

  1. Yvonne’s first concern was how to best position her company in the marketplace and attract the best buyers. Her small business did not have CPA-prepared financial statements, so that’s where we started. Our team prepared a quality of earnings report that identified issues in Yvonne’s current accounting as well as normalization adjustments that should be made to her financials. Today, most investment bankers require a quality of earnings report before they consider getting involved in a business transaction. Why is that? This report signals to all parties involved that the seller is serious about moving forward in the sale; it shows that the seller has done their due diligence and is taking steps to be transparent about the financial results of their company. Yvonne’s quality of earnings report gave prospective buyers the financial information they needed to make the best possible offer for her company.


  1. Yvonne’s company had assets in all 50 states, so we enlisted the help of our in-house State & Local Tax (SALT) experts to get ahead of any complications. We’ve seen time and time again that one of the biggest deal-killers in business transactions is a state tax-related issue that arises during the due diligence phase. Why? Because SALT is, well, state-specific and unbelievably complex (especially when you’re working with more than one state). We frequently see problems related to valuation, risk, and earnings when it comes to SALT. But not for Yvonne! Our SALT experts hit the ground running, performed an analysis, and put numbers to Yvonne’s potential sales tax liability and risk.


  1. To help Yvonne put a price tag on her lucrative business, we consulted our business valuation partners. Business valuation is a crucial component of the sales lifecycle; Yvonne needed to know the approximate value she could expect from selling her business before she was willing to move forward with a transaction. Yvonne, as a small business owner, didn’t have the help of an investment banker or broker at this stage, and she wanted to ensure that she got a valuation from an objective standpoint. Our business valuation partner performed a thorough analysis of Yvonne’s company and gave her not only a number, but the confidence she could move forward and likely receive the value she wanted from a potential sale.

So how did it go for Yvonne? First of all, she felt supremely prepared for the complex process of selling her business. With our quality of earnings report, her business attracted a number of buyers offering competitive bids. Since Yvonne knew what her business was worth, she was aptly equipped and confident in accepting one of the offers. The buyer appreciated our heavy lifting on the front-end as it gave them confidence in the financial information, which was already prepared, and shortened their due diligence period for a faster closing of the sale.

Yvonne, ever an entrepreneur, has her eye on some new business ventures — but that will come later. For now, she’s enjoying her new boat.

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