Phase 2 Step 8: Selective Disclosure – BorrowPQ Borrower’s Guide

Selectively Disclose Information

After you have your NDA in place, you will begin an exchange of information between you and the potential lender that leads to a “Letter of Interest” to purchase your business – or a decision to end discussions. These disclosures might be through further exchanges of documentation or actual meetings. BorrowPQ provides a simple and intuitive environment to manage incremental disclosure of your private company information in a secure and way that is visible in a dashboard, to support parallel discussion with multiple prospects. Here are some general guides:

Corporate Presentation Conference Call

A verbal pitch
10 minutes is sufficient
Customize pitch
Role play
Rehearse several times in advance of the call

Corporate Presentation Boardroom

A PowerPoint presentation
Keep slides short
10 – 20 slides
30 minutes or less

The Disclosure Process & Timetable

The disclosure of your company information will follow a generally predictable path, which also serves as a guideline for when you will need to be ready with business documentation. Here is an overview of that process:

…and the documentation you will need to support this schedule (much of which you will have already collected in the preparation, and sales pitch development activities, above:

Business name and location, contact info
Line of business, industry
Last 3 years’ Federal tax returns
Current interim financial statements
Cash flow forecast
Sales / accounts receivable by customer
Inventory report / assessment
Fixed assets / machine and equipment
Debt schedule
Land and building information
Principals’ credentials & W-2s
Appraisals

Note the early disclosure of litigation, and implicitly, disputes that may become litigation. Preparedness to sell includes addressing up front the negative issues that you may be dealing with and which may or may not be part of your motivation to sell, and which almost certainly will affect the lender’s appetite for purchase. Beyond litigation and disputes, such issues may include leadership team changes, sales pipeline and competitive issues, technology obsolescence, and more. While disclosure of actual litigation is mandatory, being prepared to present and address other potentially negative issues will be a key factor in assuring a positive outcome.

The cost of a failed negotiation accelerates the deeper into the process it occurs and includes not only the time and effort expended up to the point of walk-away, but also the ramifications of disclosing other private and proprietary information before the “deal breaker” was exposed.

BorrowPQ provides a structure and secure process for itemizing business issues for discussion, mitigation planning, and preparation of talking points for disclosure to prospective lenders.

Understanding the Key Players

The following tables identify the roles on both sides that should be “named” and clearly understood as to responsibilities and influence on the deal:

Be Sure to Keep a Record of All Contacts

BorrowPQ provides a secure and structured communications platform to let you control the distribution of as well as questions and answers regarding your business.

Document all conversation/correspondence
Create a conversation log for negotiation
Important to keep the parties straight
Assists in due diligence/contract preparation
Helps integration/potential litigation

PQ can provide a list of preferred third-party advisors for Step 8 including Lawyers, Management Consultants, Tax Consultants, Accountants and more.