S-24 JANUARY 19-25, 2015 CORPORATE GROWTH & M&A Advertisement SUCCESSION PLANNING Critical pre-sale considerations: Are you the well-planned event or shotgun wedding type? BY DAVID DUNSTAN The sale of a business often ranks among the most significant decisions someone will ever make. Getting married, having children and other family matters usually sit at the top of the list, but the decision to sell one’s business isn’t far behind. Rightfully so, these lifeDUNSTAN changing events often garner significant thought and preparation before commencement. However, we have found that business owners too often initiate a sale or merger transaction without any such planning or preparation, which usually and unfortunately results in a less than optimal outcome. Adhering to the following recommendations will ensure you put your best foot forward when contemplating a sale or recapitalization of your business: r Develop a strong management team fully capable of running all aspects of the business r Consider implementing an advisory board and establish the discipline of reporting quarterly results r Develop a sophisticated financial reporting capability, including audited financials, timely monthly closing processes, three-year forecasts (revised annually) and regular tracking of budget to actual results r Identify and track financial add-backs (non-recurring/unusual or one-time events) in a detailed manner and keep documentation readily available tor a business plan, competitive landscape and industry trends r Hire a reputable law firm with significant M&A and tax expertise r Obtain proper contracts with employees, customers and vendors and register all intellectual property r Resolve any material outstanding litigation r Evaluate personal financial matters with a sophisticated wealth advisor to maximize proceeds post-transaction r Engage an investment bank with significant M&A experience and deep industry knowledge relative to your business Though no guarantee of success, incorporating these considerations into your planning process positions you to achieve the best possible outcome. For those of you who prefer the shotgun wedding at a roadside chapel in Vegas, disregard the advice above, roll the dice and good luck. STAND OUT FROM THE COMPETITION. We match your objective with our expertise. Through strategy and research, content creation and multimedia distribution, Crain Content Studio will help you deepen relationships with your target audience. r Regularly develop and moni- Contact: Nicole Mastrangelo at 216-771-5158 | nmastrangelo@crain.com. r Align shareholder and management interests because this process is far too demanding to have dissenting voices r Consider best potential buyers, including an understanding of the issues and strategic fit if you decide to approach corporate strategic buyers r Consider spinning-off unattractive or non-core assets David Dunstan is a Managing Director for Western Reserve Partners LLC. Contact him at 216-589-9530 or ddunstan@wesrespartners.com. GLOBAL TRANSACTIONS FOCUSED ON WHAT MATTERS TO YOU In a sea of complicated legal issues, it’s easy to lose perspective. Clients ask us to help them see the big picture and handle the details. Our knowledgeable and accomplished team offers solid advice and innovative solutions to your most complex problems, allowing you to focus on building your business. Don’t buy an FCPA problem in an overseas deal BY JUSTIN ROBERTS AND SEAN PURCELL American companies contemplating the acquisition of an overseas entity can reduce their subsequent risk of becoming the subject of a Foreign Corrupt Practices Act (FCPA) investigation by conducting the appropriate amount of due diligence before completing the transaction. The scope of due diligence will be based on factors such as the size of the enterprise, the risks associated with the acquisition target’s industry and the countries with and in which it does business. Efforts should be tailored to the identified risks and it is critically important that the acquiring company does not just employ a “check the box” approach to its due diligence. The old saying goes that the best defense is a good offense. If a company has the misfortune to be ensnared with an FCPA issue related to the pre-acquisition conduct of the target entity, it can point to the fact that it took all appropriate steps that could be reasonably expected. The Resource Guide to the U.S. Foreign Corrupt Practices Act, released by the Department of Justice and SEC in late 2012, notes that the government may decline a post-acquisition FCPA enforcement action if the ac- tionnaires completed by relevant employees r A review of the target company’s anti-bribery training or compliance plans r Interviews of the target’s company’s compliance staff and accounting department, and r Interviews of sales staff regarding sales that are identified as having a higher risk for corruption r A review of accounting records r Appropriately tailored ques- ROBERTS PURCELL quiring company (assuming it wants to continue with the transaction) can demonstrate that it: 1375 East Ninth Street One Cleveland Center, 9th Floor Cleveland, OH 44114 216.623.0150 CHICAGO · WASHINGTON, D.C. · CLEVELAND · TOLEDO · AKRON COLUMBUS · CINCINNATI · ORLANDO · FORT MYERS · NAPLES FORT LAUDERDALE · TALLAHASSEE · NEW YORK r Conducted appropriately tailored due diligence r Trained the relevant personnel at the newly acquired entity on FCPA issues r Ensured that the acquiring company’s compliance program and internal anti-corruption controls were applied to the newly acquired company, and r Perhaps most importantly, identified and disclosed to the government any corrupt conduct identified during the pre-acquisition review For this reason, among others, any due diligence plan must be put in writing and all the findings should be documented for future use. The due diligence plan should include: r A request for documents Risk factors to look for include historic corruption in the country or region where the target company conducts business, government contracts the target company may have and its use of third parties such as sales agents and intermediaries. If there is not enough time to review every payment or sale, the due diligence should include a well-documented testing of sample transactions that have been identified as having higher levels of risk. While no due diligence plan can guarantee that a post-acquisition FCPA issue may not arise, dedicating the resources to conduct tailored due diligence on the front end of the transaction can decrease the risks of buying a much more costly FCPA problem after the transaction has closed. RALAW.COM ROETZEL & ANDRESS, A LEGAL PROFESSIONAL ASSOCIATION Justin Roberts is a Partner in the Vorys Cleveland office and a former assistant U.S. attorney. Contact him at jjroberts@ vorys.com. Sean Purcell is a Partner in the Vorys Washington, D.C., office. Contact him at mspurcell@vorys.com. Crain’s Cleveland Business Custom Publishing