Prepping for Exit - a Founder’s Perspective on M&A - Issue #33

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Prepping for Exit - a Founder’s Perspective on M&A

Is it time to consider selling your startup? Looking for a founder’s perspective? Dave Parker is a five-time founder with >10 exits. This reading list is practical advice on prepping for exit, pricing and the process.

Due Diligence process and documents. DD checklist breakdown. You can find an M&A Due Diligence Checklist here.
In addition to recent news, I’m breaking down the DD checklist for founders considering selling their companies.

Buyout Multiples Diverging between US and Europe
How can this impact your selling price? It could depend on where your buyer is located!
Q1 2021 PitchBook Analyst Note: Exploring European Buyout Multiples | PitchBook
Due Diligence Breakdown
OK, let’s breakdown the Due Diligence checklist into broad areas - let’s start with Organizational and Founder’s matters… The caveat here, I’m not a lawyer; I’ve just spent a lot of money on lawyers over the years.
Organizational Matters
Let’s face it, most of us as founders have our lawyer’s file Articles and Bylaws when we incorporate and we rarely look at them again (until it’s time to consider a deal) then the rush is on to understand several outstanding items:
  • Timelines for notifications - how and when you need to notify shareholders for approvals are outlined in your Corporate documents.
  • Annual Shareholder meetings - if you haven’t been doing Annual Shareholder Meetings, you should get them on the calendar. This includes an annual shareholder update and financials.
  • Qualified Small Business Stock (QSBS) provides that you as the founder and investors (not noteholders before conversion)
Is your stock a Qualified Small Business Stock? It depends on when and where you incorporated as well as how long ago you incorporated it. Given the tax advantage, it’s worth knowing in advance.
The QSBS Tax Exemption: A Valuable Benefit for Startup Founders and Builders | Brown Advisory
Why Defining a Corporate Structure for Startups Matters
Founder’s Matters
For founders, have you completed some of the tasks that will help you get the best tax treatment when you sell the company?
Did you complete your 83b Election when you incorporated?
Techstars Startup Digest Prepping for Exit - a Founder’s Perspective on M&A is curated by:
Dave Parker Dave Parker
dave.parker@startupdigestmail.com
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