October 2011 Feature Article:

By: Karl Ahlm, Gould & Ratner LLP

For owners of companies that may now or in the future have interest in pursuing a sale of their business or other "liquidity event" transaction, there remains a substantial amount of capital earmarked for investment in these types of transactions. Corporate and other "strategic" acquirers have record levels of cash on their balance sheets and a 2010 report by research firm Pitchbook estimated that $477 billion was available for investment by private equity funds, including funds targeting investments in middle market and lower middle market businesses. 

Although recent macroeconomic developments, including slower economic growth in the United States economy and the possibility of a recession, and the European sovereign debt crisis, could have a chilling effect on merger and acquisition activity, various reports indicate that both the total number of M&A deals year to date in 2011 and overall deal size compare favorably with 2010 levels (and, in the case of deal size, there has been a noteworthy uptick in 2011). In short, there are very attractive liquidity opportunities available for sellers of healthy businesses.

We have found repeatedly in representing both buyers and sellers of middle market and lower middle market businesses that advance planning by sellers that might have some "loose ends" or deficiencies in certain areas can help to facilitate a smoother and more efficient due diligence and sale process, and avoid unnecessary distractions that in some cases can delay or even derail a sale process. These actions, many of which are good practices for any business to follow, even if a sale is not anticipated, are for the most part not difficult to implement and should help mitigate unnecessary legal risk.

Read more of our October Feature article here.