This webinar was geared to those in the process of business transition. Whether looking to sell your business, transition your business to a future generation, or expand your business through acquisition, this webinar focused on key concepts from a financial and tax structure that all business owners should consider in advance of any business related transition. The webinar discussed matters of preliminary planning and preparation for transition, understanding business value, tax consequences and tax structuring matters, pitfalls to avoid, and other unintended consequences.

1. Preparing to Sell?
Topics and Tips for a Successful
Transition
Presented By
Kurt M. Trimarchi, CPA, CM&AA – Managing Partner
David B. Blain, CPA, CVA - Partner

2. Kurt Trimarchi
• CPA, CM&AA
• Managing Partner
• ktrimarchi@macpas.com
David Blain
• CPA, CVA
• Partner
• dblain@macpas.com
About Us

3. WebinarAgenda
This webinar will focus on key concepts in planning and
preparing for a business transition.
The webinar will focus on addressing:
• Preliminary planning and preparation for transition.
• Understanding business value.
• Tax consequences and tax structuring matters.
• Pitfalls to avoid and be aware of.
• Other unintended consequences.

4. Begin With The End In Mind

5. What should you do in advance of selling your
business?
•Financial Reporting
•Team
•Valuation
•Structure

6. Team
1. Third Party Support – Business/Transaction Advisory,
Attorney, CPA/CVA.
2. Internal Team – Senior management, key operations
personnel, finance/accounting.
3. Other Trusted Advisors
Having the right team of professionals is key
to a successful transition.

7. Financial Reporting
1. Review Financial Reporting Dept. and Internal Control
Environment.
2. Consider an Audit (especially for financial buyer).
3. Quality of Earnings – EBITDA and Cash Flow.

8. Cash Flow
• Usually defined as Free Available Cash after all expenses
have been paid.
• Expenses would include all operating expenses including
taxes, interest on debt and capital requirements.
• Free cash flow does not include depreciation and
amortization – non-cash items.

9. Free Cash Flow Calculation
Scenario 1
Revenue $1,000
Operating Expenses ($500)
Taxes ($100)
Interest on Debt ($50)
Capital Assets ($100)
Free Cash Flow $250
Scenario 2
Revenue $2,000
Operating Expenses ($1,500)
Taxes ($100)
Interest on Debt ($150)
Capital Assets ($100)
Free Cash Flow $150

10. Cash Flow Analysis
• From the valuators perspective, scenario 1 provides more
value – More free available cash from that business model.
• Value could be impacted by discount rates but overall the
free cash flow drives value.
CASH IS STILL KING

11. Valuation Consideration

12. What is BusinessValuation?
Establishing the Value of an Asset
• Tangible Asset Valuation
• Building and Land
• Equipment
• Intangible Asset Valuation
• Goodwill
• Trademark
• Customer Lists

13. Asset Approach
• Adjust assets and liabilities to Fair Market Value.

14. MarketApproach
• Comparable transaction data.

15. Income Methods
• Capitalization of benefits method -- if stable.
• Cash flow/ EBITDA
• Benefits = cash flow
• Discounted future benefits -- when earnings are not stable.

16. Pre-Sale Ownership Structure Review
1. Review Current Ownership Structure for Planning
Opportunities and Risk Management
(Jurisdiction Shifting and Valid S Election)
2. Review Entity Type

17. What do the different types of tax structures
mean to me?
Traditional Structures
1. Asset
2. Stock
3. 338(h)(10)

18. TransitionWithin the Family
1. GRAT
2. IDGT
3. IDBT
4. GIFT

19. Pitfalls and Consequences
• Be honest about your business.
• Use highly qualified professionals.
• Communicate, communicate, communicate.
• Begin with the End in mind.

20. Kurt Trimarchi
• CPA, CM&AA
• Managing Partner
• ktrimarchi@macpas.com
David Blain
• CPA, CVA
• Partner
• dblain@macpas.com
Questions?

21. Building Successful
Employee Relationships
A Cornerstone to Fraud Prevention
and Risk Management