In our Building a Sellable Business series, both parties have now satisfied. We’re ready to sit down at the closing table. Can you believe it? After a “mere” 35 articles, months of prework, and thousands of hoops jumped through, we’ve reached the actual sale of your business! But what happens next? Where do you go to sign paperwork, and what can you expect to happen when you get there? Well, let’s dive in and look at what you can expect at the closing table of a business sale.
Just about every Fall, the United States enters into final rounds of an election season. Candidates have been traveling around, voicing their platforms for months and maybe years. And as candidates race for a voter’s final nod, the election process can get quite ugly. If you watch any election coverage (past or present), you’re bound to see candidates or candidate representatives calling each other names, bashing each other’s agendas, or even throwing actual punches.
Now with that extreme picture in mind, let’s talk about what’s actually going to happen at the closing table when you sell your business.
Many times in today’s advancing technological world, closings will take place virtually via audio or video conferencing. Lawyers will have both parties use electronic signature software. Or, they’ll have the parties sign paperwork and send the original documents via overnight mail delivery. For sellers and buyers who live in different locales, this option can save travel time. And for those people whose schedules pull them 100 different directions a day, the virtual close can save them time away from other responsibilities.
However, some buyers and sellers don’t like the impersonal feel of the virtual closing. I’ve even heard clients call them “cold” and “anticlimactic.” After all of the work buyers and sellers have put in to get to the closing table, many want a more formal, nostalgic-type of closing. Typically, these live-paper closings take place at the buyer’s attorney’s office.
While virtual closings are fairly straightforward and predictable, live-paper closings leave room for creative celebratory activities. Sure, I’ve been in my fair share of boring closings where people sit around a table, sharing platitudes and getting down to the business at hand. But I’ve also been at live-paper closings with fancy buffets, photographers, 3’x5′ representative cardboard checks, and expensive gifts for all who attend.
But no matter how or where buyers and sellers meet to sign on the dotted line, there’s no doubt that all will sign, and sign, and sign, and sign. It’s inevitable. You see, all the documents we’ve covered in the last few episodes are now in final print. You’re at the closing table to place your signature or initials in blue ink on every page of the purchase agreement. Even if some documents don’t include signatory blank lines, most attorneys will still have you sign or initial the right-hand corners of every page. This proves that you’ve reviewed and agreed to each. And since the purchase agreement could include 200-300 pages of documents, you’ll be signing and signing and signing. So be prepared for that.
Additionally, since all of those pages have to be notarized, don’t forget to carry a copy of your driver’s license with you. Don’t be like a client of mine who showed up to closing without his wallet and delayed closing until someone from his office could bring it. Don’t be “that guy.”
After you sign all of the documents, be prepared to leave the table without a check. Yep, you heard me correctly. More than likely, you’re not going to get a check for selling your business that day.
Now, I’ve seen several legal teams go in and make those huge, 3′ x 5′ prize-winning checks and have the parties pose with them for posterity’s sake. But more than likely, you’re not going to receive the money after signing the paperwork.
You see, the buyer’s attorney has to confirm things like title changes and contract transfers. Many small transactions have to be funded before you receive your final payment, too. In fact, some of the people around the table (like your business broker, your attorney, your CEPA, etc) may receive a check at the time of closing, even though you don’t. And that can be frustrating to many people.
After the formalities of document signings at the closing table, the business broker or M&A Advisor will often arrange and sometimes pay for a celebratory dinner. If your transition expert sets up a dinner, he will usually schedule closing in the late afternoon so that everyone can leave the closing table and go directly to a nice dinner. I’ve been to many of these celebrations where exit team members, employee team members, friends, and family members attend.
Many times, these particular events aren’t that dissimilar from a wedding celebration except you’re the best man, and the bride is your business. Most likely, you’ll get up and give a speech. Maybe you’ll tell funny stories about highs and lows you experienced in your business over the years. You’ll even recognize key people who helped you along your way. You may even have gifts for certain employees, advisors, and others.
I clearly remember my first business sale. I signed the documents, and my wife and I went out with some friends to celebrate the accomplishment. It wasn’t until I got home and laid down for the night that it hit me… What did I just do? You know, I just sold my business. Did I make the right move? What do I do now? Worries and questions ran through my head all night long. And honestly, that happened to me the two other times I’ve sold businesses since then.
You’re probably going to be in the same boat I was. At the end of the day your business sells, you’re going to experience a myriad of emotions. Everything you’ve worked for has now come to fruition. Your friends, family members, advisors, planners, and employees will probably be there throughout the day to celebrate with you. By the time you get to the end of the day, the adrenaline will wear off. Things will settle down, and anxiety may creep in.
Obviously, you’re going to experience excitement and happiness. I mean, you’ve planned this day for years! However, you’ll probably second guess your decision, too. So whenever you reach this point in your business, remember that it’s just the start. There is so much more to life! No matter how old or young you are, there is so much more to live for! You can volunteer, start another business, travel, spend time with family. You name it, and you can do it!
Ultimately, a closing day doesn’t have to be the end. It can be your new beginning. Although you’ll experience some sadness and fear, you have permission to rejoice, too!
Before you pack up your bags and head out on your adventures, though, we have a few more details to discuss. You have to know what to do with your new-found wealth before you go out and blow it!