Preparing for a transaction
Owners considering a sale, acquisition or recapitalization need to decide which information to share and who can approve the next step. Commonstake organizes the commercial information and the decisions owners need to make before the transaction proceeds.
What the records need to show
Ownership records, financial statements and management’s description of operations should give reviewers a consistent picture of the business. We help identify gaps and organize the information that an owner, prospective counterparty or specialist adviser will need to examine.
The work can cover the ownership structure, material obligations, financial reporting and the assumptions behind management’s plans. Where a record needs verification, a valuation or a legal interpretation, we identify the question for the relevant specialist.
Explaining the figures
A buyer may ask why the latest management accounts differ from the year-end statements, how much revenue depends on a few customers or which costs would change after an owner leaves. Assemble the supporting explanation before presenting a single earnings figure as the whole picture.
Commonstake can help management identify the periods being compared, the items requiring explanation and the records that support them. The company's accountants confirm the accounting treatment. A commercial preparation exercise does not replace an audit or a valuation.
| Area | Preparation question |
|---|---|
| Customer relationships | Which revenues are recurring, concentrated or linked to the departing owner's personal involvement? |
| Working capital | How do seasonal stock, receivables and supplier terms affect the cash needed to run the business? |
| Management dependence | Which approvals, relationships or technical responsibilities would need to move after completion? |
| Significant commitments | Which contracts, leases or obligations need the appointed advisers' review for the proposed transaction? |
The answers influence what the owners need to prepare and what a counterparty may want to examine. They should not be converted into an unsupported promise about price or completion.
Questions still open
A preparation checklist is useful when it gives each open item an owner and a next step. It should distinguish an unavailable record from an unresolved commercial decision.
- Which information is available, and who can confirm it?
- Which shareholder or board approvals may be needed?
- What commitments affect the proposed timetable?
- Which questions belong with accountants, attorneys, lenders or other transaction advisers?
Commonstake can coordinate the record requests and decision materials. The scope should specify who communicates with counterparties and who is responsible for any transaction execution.
Recapitalization and owner objectives
One owner may want liquidity while the business needs to retain funds. Another may want to change the balance of debt and equity without changing day-to-day management. Those objectives create different demands on cash flow, control and future distributions.
We help set out the funding requirement, compare the commercial implications of possible structures and identify assumptions for further examination. A comparison should show how repayments, distributions or new ownership rights could affect the company and its existing shareholders.
A question worth separating
The amount an owner wants to withdraw and the amount the business can support are separate inputs. Assess each before treating a proposed capital structure as workable.
The assignment may produce a recapitalization brief, an assumptions register and a list of questions for funding and transaction specialists. Commonstake does not promise financing, place securities or provide a valuation through this website.
Responding to information requests
An initial discussion and a later diligence review need different levels of detail. Agree who can release each category of information and when confidentiality and access arrangements must be in place. Existing customer, employee or lender obligations may affect what can be shared.
Before approaching the next stage, management should be able to explain an unavailable document, a figure awaiting reconciliation or a consent that has not been obtained. Read about preparing for the buyer's first request list.
What the board needs to decide
Prepare the purpose of the transaction, the alternatives considered and the matters still requiring advice. Include what management expects to happen after completion: changes in reporting, ownership rights, financing obligations or management responsibilities.
A decision brief should make the requested approval clear. The board can then direct further work, set conditions or ask for a different option before the business commits.
Defining the preparation
When you write to Commonstake, say whether the business is considering a sale, an acquisition or a change in its capital structure. Include any decision date already set. Confidential records can be exchanged later through an agreed channel.
The information behind an ownership proposal
A buyer's request list can expose differences between the owners' expectations and the information the business can provide. Organize requests by subject and identify the questions still unresolved.
Money paid for an existing owner's shares and new capital subscribed into the company have different destinations. A proposal can contain both. The owners should be able to see which part changes their holding and which part funds the business.
Keep alternative structures open until their conditions are understood. Commercial preparation does not settle the legal or tax consequences. The request list should identify the questions for the appointed advisers without implying those conclusions are already available.
An information gap can change the proposed timetable
A business may have the documents requested by a buyer but still lack agreement on what they show. A shareholder list, a distribution record and an earlier agreement may describe different effective positions. We organize the sources and identify the discrepancy before packaging them as a settled account of ownership.
The same applies to operating information. The period used in a financial schedule needs to match its source records, and an adjustment should have a stated basis. An unanswered question is kept with the relevant item so it is not lost when a file is replaced.
Keep the owners' decisions separate from document collection
The person supplying a document may not have authority to agree a commercial term. A request to explain a customer contract is different from a request to approve a warranty about it. The preparation distinguishes those requests and records the person who can respond or obtain advice.
We can coordinate the request list and decision papers around the proposed transaction. Counsel, accountants and other appointed specialists remain responsible for their professional work. Where their conclusions affect the owners' alternatives, the relevant question returns to the decision paper with its current status.
Compare proposals on compatible terms
Two offers can use the same headline value while differing in payment timing, retained obligations and conditions. The comparison identifies what is payable at completion, what is deferred and what depends on a future event. It also records which information a prospective buyer is still relying on.
Owners can then consider the proposed ongoing involvement beside the economic terms. A payment conditional on future performance may require a continuing relationship that an immediate exit objective would not accommodate. The purpose of the preparation is to make that conflict visible before the owner chooses a path.