Trusted Counsel merged with Moye White on September 1, 2021. The following podcast was recorded prior to the merger. 

In this episode of In Process Podcast: Conversations about Business in the 21st Century, Trusted Counsel’s John Monahon and Valerie Barton (filling in for Evelyn Ashley) speak to Dan Bradbary, Founder and Managing Partner of PMI Advisors. An accomplished entrepreneur, speaker and author, Bradbary has extensive experience with founding and selling various businesses. He founded PMI Advisors in 2017 upon recognizing the under-served needs of mid-market companies regarding post-merger integration. Since its founding, PMI Advisors has expanded practice to other phases of business management and operations, ranging from business continuity planning, sale preparation, business process optimization and divestiture and carve out.

According to Bradbary and PMI Advisors, when preparing a business for sale, the Owner/CEO needs to approach the exit strategy with the same focus and drive that helped to build the business. Hence, an Owner/CEO who is “ready” with an attractive business will greatly improve their probability of a successful business exit.

PMI Advisors recommends the following key steps for a successful exit:

Hire a consultant who specializes in M&A
Selling a business is a complex process. A consultant will guide business owners through the steps that often include some sort of readiness assessment, plan development, implementation and value optimization.

Have a transition team
Having a transition team is favorable because they will work alongside you to address all issues involved with selling a business. There will be tax planning needs, legal compliance and succession plans that might need to be put into place. Once you have your transition team in place, schedule an introduction “kick off” meeting.

Structure your advisory board
An advisory board does not have the legal tethering like a board of directors has – it’s more informal and easier to assemble. It’s comprised of qualified subject matter experts that have knowledge of your industry and specialties in areas such as technology, marketing, sales, operations or human resources. They offer suggestions and non-binding recommendations about key elements to make sure your business is attractive to buyers.

If you receive an unsolicited offer – engage with your legal counsel right away
It is very exciting to receive an offer, but Bradbary warns, “you don’t need to rush into signing a letter of intent.” The main area of concern is that once the letter of intent is signed, the business is taken off the market for several months. You need to be prepared to be locked in during that time period.

By taking these key steps you will be well on your way to drastically improve your probability of a successful exit. Be sure to listen to the entire interview below.

During the course of the podcast CEOs, business owners, and C-level executives will learn:

  • The PMI Advisors process when assisting business owners looking to sell
  • What is meant by having an emergency operations plan
  • The difference between an advisory board versus a board of directors
  • Post-sale final thoughts

Don’t miss a single episode of our podcast show. Subscribe to our show “In Process Podcast” on Apple iTunes and on Google Play to receive this episode as well as future episodes to your smartphone.

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The Nuts and Bolts of Selling your Business: Due Diligence

Dan Bradbary, Managing Partner, PMI Advisors

(c) Trusted Counsel (Ashley) LLC. All Rights Reserved.

It’s time for In Process, conversations about business in the 21st century with Evelyn Ashley and John Monahon. Presented by Trusted Counsel, a corporate and intellectual property law firm. For more information visit

John: Welcome to In Process. I’m John Monahon.

Valerie: I’m Valerie Barton.

John: And we are with Trusted Counsel. Valerie welcome to the show.

Valerie: Thank you. Thank you.

John: For those that don’t know, Valerie is one of our M&A attorneys at Trusted Counsel. She has a long history doing M&A deals, strategic partnerships and helping companies exit.

Valerie: Since 2002.

John: Yes. And you’ve been with us for how long now? A couple years?

Valerie: I just had my one year anniversary in January.

John: Oh my gosh.

Valerie: It just seems like I’ve been here forever.

John: It feels so much longer.

Valerie: Yes, it just feels like so much longer. Yes, exactly.

John: In a good way.

Valerie: In a good way.

John: And today it’s good that you are my co-host because we are having a very interesting conversation with Dan Bradbury of PMI Advisors. And Dan launched in 2017, his company PMI Advisors to help mid-market companies with M&A efforts. And luckily he’s here today. He was at the Association of Corporate Growth Event and we’re lucky to have him as a guest. So Dan welcome to the show.

Dan: Well thank you. I’m glad to be here today. As you mentioned I spent the early part of this week, a couple of days at the Association For Corporate Growth which is a collection of dealmakers. Here you have a lot of parties involved in the M&A activity, everything from investment bankers, attorneys, accountants, private equity firms, advisors. And as I like to say, you get 1000 of these extroverts talking deal business in a general area and it is very engaging.

John: Yes, absolutely. Well we’d love to hear more about what PMI Advisors does because M&A services are obviously a broad range and you guys do a lot of great stuff but can you tell us more specifically about what you do?

Dan: Right. Exactly. When I started this company in 2017 I had just previously sold about two years before that a company providing virtual data room services. So for about a 10 to 12 year period I was pretty ingrained in the M&A marketplace. I saw a need there for post-merger integration. I know that’s kind of a long term but it’s a process where you mold a company who is buying or acquiring another company, you mold those operations into those operations inside your company. It’s often referred to as when the deal really starts, when the activity really starts and when you start putting these pieces together. So the company started out in post-merger integration and then as most companies I’ve started and been involved in they kind of evolve and morph over a period of time.

Once we got into post-merger integration then after the first 100 days, it’s a very critical phase there, but then you start looking at how can the companies do things better and we evolved into business process optimization, another kind of long term there. But it’s dropping up to maybe 10 or 20000 feet when you really start looking at the processes that are going on inside the company and is there a better way that we can do things from a holistic matter.

From there it evolved into business continuity planning. You have to make sure that the systems and everything are protected from a business ongoing operations in the event of either man made or natural disasters that may occur so that you have a continuity of operations.

And on the other side of it you have carve outs and divestitures. A lot of major corporations are going through a change in that they oftentimes identify certain divisions or departments or subsidiary companies that no longer fit their core focus. And as they start going down that path they want to carve out and divest themselves of certain areas, of certain product lines. It’s a very intricate process because a carve out and divestiture you have to really cut all the ties back to the parent company, stand that operation up on its own as an entity. Cut all the ties back, financial and I.T. back with the parent company and then divest or sell that.

And all of that kind of led into then the business preparation, preparing businesses for sale, as kind of a full circle where we are really focused on that area now in working with companies with business owners, entrepreneurs, who are looking to position their businesses for sale in the next one year, two years, three years, some kind of time frame like that. So it’s kind of a variety of services all based on a consulting model of providing additional services for the corporation who is undergoing change.

John: Right. And one of the things when you started this off is you said that you had … well we know that you’ve been a serial entrepreneur so you’ve done that, you’re 67 now and you decided to launch PMI Advisors and you mentioned your past experiences. Was it specifically your past experiences that led you to say “Hey, people need all these services, specifically the post-merger integration” and then that led obviously to the previous ones, or did you see some people struggle that you’re like “Hey, this issue really needs to be solved for people.”?

Dan: Well it’s really kind of both of them but maybe more on the latter portion of what you said there where it’s interesting to go in and identify where there is a need for a product or a service. And if you can position yourself to satisfy that need in the way of services that you provide and extended services maybe through a professional network then it’s very beneficial.

Just kind of a recap here. My first company, interesting, was Bradbury and Company and started that many many years ago, so long ago that I really don’t want to say, but many years ago and even at that time had a nameplate stuck on the front of my car that said Bradbury and Company, I thought I could enhance the ability to write off as a company asset. But that really didn’t work. But I learned something very quickly there after starting or having that company for a couple of years was it was a negative to have my name associated with the company. Because oftentimes we would go into projects and I had a very good team with me and the client would always ask “Well where’s Bradbury?” or “Why is Bradbury not here?” Well the bottom line was is that these people who were in the room and meeting with the client were much more qualified than Bradbury to serve their needs and to accomplish those things.

But that was the first one. After that there were a series of companies that again kind of revolved around the need, identifying a need for services. One was Aviation Facilities Group and I’ve always kind of been coming up with names for companies that are somewhat descriptive; Aviation Facilities Group, Facility Relocations Incorporated. That one back in the heyday about 20 years ago in Atlanta there were a lot of relocations, a lot of big law firm relocations in and around town and they would hire us to manage the actual move process or the preparation for the move process which oftentimes took months and months and months to accomplish that. A company that I started also was Global Deal Markets as a listing online service for companies for sale. PMI Advisors which I started and ran here in Atlanta for about 12 years it grew to at the time I sold it I had five offices, 150 people and a Fortune 100 client base. We did a lot of work associated with the sponsors for the Olympics as they were coming to town, putting down their 40 million dollar sponsorship package and providing typically services in kind rather than the cash donations. So they all had these major projects going on.

After I sold that I had started a company called V Rooms, virtual data rooms. This is a secure workspace for those of you who have been in the M&A environment. It’s a secure workspace where you can host very confidential information to be made available by the seller to the potential buyers for their scrutiny and further investigation. I sold that a couple of years ago and I was sitting around one day and said “Hey here’s an idea for another company” after seeing the struggles of companies buying companies and how unmanaged or ill-managed typically the integration effort was afterwards.

John: So you have a little bit of experience in this space.

Dan: It’s been fun. And why do I continue doing it? Because I really enjoy it, that gets my juices flowing so to speak. It’s just very enjoyable.

John: So one of the terms that is gaining popularity or that you’ll hear a lot amongst people in our space is business exit planning. So when do you advise business owners to start their business exit planning?

Dan: I’ve been I guess a proponent of Stephen Covey’s Seven Habits of Highly Effective People for many many years. And one of his key habits was start with the end in mind. And so I really encourage those who are starting a business is not to only just look at what you’re going to do but also to start to identify and at least maybe carve out an exit path. Not to say that that will not change which it probably will but start early.

About ten years ago there was a book published by Pete Chrisman. He actually co-authored it along with another gentleman but it was called the Ten Trillion Dollar Opportunity and it was really focused on the baby boom generation and all the businesses that were going to be coming on the market at some point. He is the one who actually I guess would be the grandfather of the exit planning arena or the industry out there and over the last 10 years or so it has really become kind of an accepted standard. It’s kind of a new term that people outside of the M&A environment may not be that familiar with but its exit planning for the eventuality of a business exit, which is no surprise when you tell business owners that one day you will exit the business. And it can be in several different fashions. But an interesting statistic is that 50 percent of the business exits are not voluntary. And that’s really a shame where you need to have a plan in place for that eventuality a possibility of death, sickness, disability, and a number of other things, disagreement between the partners, where things can be put into place that protect the value of the company and the investment that has been made going along there.

Valerie: You are talking the lawyers language right now because we talk about this all the time that you’ve got to plan for somebody dying, somebody getting sick, how are you going to move this on to your children and everything else. Do you find that the founders that you’re working with have any plans for these or you’re saying that half have no plans for succession?

Dan: Well actually it’s less than half have no plans for succession. There’s statistics out there that show less than 20 percent of business owners have a written exit or succession plan. The number I was referring to, the 50 percent, is the inevitable you’re going to leave the business not by choice but it’s not going to be a planned exit at some point but less than 20 percent actually have a written plan in place.

John: That means that we have a lot of ground to cover.

Valerie: We do because John and I have heard this story a lot and it does happen frequently that we realize that somebody has come up against that wall. And actually as we encourage them to plan for these events they tend to fight against us saying “That’s not going to happen, we’re not going to fight. There won’t be any disputes. We don’t have to worry about that.” We fight that battle daily.

John: The “We’re not going to have any fights” line is one that we hear all the time.

Valerie: Definitely.

Dan: Right. And interesting kind of side note on that and I have seen this evolution in the last couple of years but the employment of a family coach but a family dynamics coach being brought into the fray of a family owned business going through a transition. I was talking with one of our consultants just recently and he said he recalled an occasion where there were warring factions, actually two brothers inside a family owned business, that could just not get along. So the family patriarch brought the coach in and he said merely by his presence in the room the two brothers tended to act more civil. They actually got things done without him actually having to do anything other than show some type of concern and empathy that things moved along. So the family dynamics coach is really one to be I think an important feature going forward.

Valerie: Definitely.

John: Walk us through sort of the process as you’re assisting business owners. What are some of the things that they can do to optimize business valuation while also preparing for the transition of their companies?

Dan: It typically starts … our process is in three phases. We have an upfront assessment phase, the second phase is a planned development phase and then we have an ongoing monitoring or value acceleration phase.

In going back to the first phase here with the assessment. The assessment is very critical. Our process that we use we go in with the business owners and if there are multiple business owners we go through a questionnaire which is quite detailed. It’s maybe having a 20 functional areas, 150 questions that really drill down into the business operations of the company. From that and it’s always very interesting to compare the responses from the different shareholders, especially their active shareholders. So we have the discussions with each one individually and then we pull a comparison side by side chart and sit down with them. That can have some very engaging partner meetings where they have wide differences of opinions of how their company that they own is performing in different areas. So we work with them to come up with more or less a composite rating, a composite score, getting them to agree as to where they are in these different areas.

But the original assessment it comes out being about a 60 to 80 page report, very detailed. But it really starts to show the underperforming areas of the company. A lot of business owners especially having not gone through the M&A process and being introduced to it they may have a skewed opinion of the organization and value of their company. Once we go through the assessment phase it’s almost like an aha moment where the business owner starts to understand that well maybe the business is really not stacking up according to industry standards out there of how I thought it would.

And also in the upfront assessment phase we pull in a lot of sales side due diligence. Due diligence is the phase that kills a lot of deals. And for this reason is that that business owner will upon receiving the first due diligence check list from the buyer he typically will roll back in his chair, wipe his brow a half a dozen times and go “Why in the world does this buyer need all of this information?” And our answer is because if you were buying a company would you not want these details, would you not want this level of information? So we start preparing that buyer for the onslaught of information requests that are going to come. As we often say that time kills a lot of deals. If you have an owner who is nonresponsive to a buyer request for information so that the buyer can make an intelligent decision then after a couple of passes of no response or very late response that buyer will merely fold their tent and go somewhere else. They don’t have time to waste on a transaction that is probably not going to happen.

So that’s getting through the first phase. And coming out of there as I said the business owner has an idea as to how they’re stacking up against the industry standards but also the areas that need to be fixed or need to be fine-tuned or professionalized inside the company. And this can be everything from the I.T. operations, from the H.R. operations, maybe the supply chain procurement, a whole list of areas, and we have a team of 40 senior level consultants on a national basis who can parachute in to help fix those problems. So it’s a very intricate process in working through that.

And the secondary or actually the third phase is the value optimization. But we really believe that in setting up, and we may talk about this later, but a board of advisors where on a monthly basis we’re having a board of advisor meeting which tends to keep things on track. Because business owners they have been heads down running their company for the last 20-30 years. They can develop along with us some of the best plans out there for how they’re going to get to their end goal or liquidity event. But what happens often is that they get consumed after the planning process, they get consumed back inside their companies with customer issues, with personnel issues, they get consumed back into running their companies and lose sight of where merely two months ago they said they wanted to go in the next year or two years.

So a very valid function of this monthly board of advisor meeting is to have that independent third party who is tapping them on the shoulder once a month saying how things are going, do we need additional resources here, how’s this project coming along here. And without that, too many things tend to kind of slump back into the daily operation mode. So those three phases right there really kind of position a business for sale or even if it’s not for sale, we have optimized the business so that it actually runs more profitably, there are better systems in place and it’s actually going to be a smoother running operation whether that business is sold in the next one, two, three, or even five years.

John: All of that resonates.

Valerie: It does.

John: With us and what we see with business owners that have to sell. I mean first talking about not realizing some of the flaws in their business and they’re not fatal flaws but sometimes they think their business is worth X and it’s really worth Y and that’s a psychological barrier that must be met for that. And then also just the end that you were talking about was sort of preparing it as a business which is what the buyer wants to buy right? You want to buy a business that can be ongoing without necessarily the sellers involvement, they’ll probably be asked to be involved but ultimately people are interested in buying actually a functioning business.

Dan: Right. A functioning business with the systems in place so that the business has longevity well past that let’s say that key individual, the owner, being involved.

John: What are you seeing right now in the market? It’s been an interesting ride especially for the last five years but is 2019 going to look like?

Dan: It’s really interesting. One of the sessions I attended, and this is hot off the press, coming from the ACG conference one of the sessions I attended was kind of the economic outlook in the M&A environment here for 2019. And there were some naysayers in there, a few rah rahs, but everyone in general kind of conceded the fact that, as you were saying, for the last five years it has been a seller’s market. It has been Boomtown. A lot of sellers have been able to sell their companies that may be not all that well-prepared. The multiples were up there. It was a hot market. The private equity world was sitting on top of tons and tons of cash and they were in a bidding war for those sellers’ businesses. That seems to have plateaued. And for 2019 I’d really think it’s going to be hopefully not a severe slowdown but I think there’s definitely gonna be a slowdown. And the bottom line there is that those businesses that are prepared, those businesses that are prepared to go to market, to find attractive buyers and be attractive themselves, those are the ones who are going to wind up having successful deals.

It’s very interesting to note also even historically over the last several years that over 50 percent of businesses that go to market, and sometimes that number I’ve heard as low as 20 percent of those that go to market, actually sell. There is a huge portion of businesses that are marketed through the process but in the end game they actually never sell. And the business owners wind up just going into a slowdown, a close down mode, maybe a liquidation mode and walking away from it and they’re walking away from a vast fortune.

John: So are you sensing in the market right now that you said there’s a little bit of a plateau right now but do people feel like they’re going to miss their window if they can’t get their business ready in the next year, next two years, that they might have to suffer through a five year drought before they can sell their business, are they getting sort of fearful of that, of missing their window?

Dan: Well we all know that the business cycles out there they go up and they go down. And we’ve been on an increasing trend for the last five years. The market that we’re really identifying with is the retiring baby boomer business market. And what’s unique about them is that when we look at those individuals and let me just roll off a few statistics here that … the baby boomer business market, the age wave. The first baby boomers turned 65 in 2011, 10,000 turn 65 every day.

John: Wow.

Dan: The baby boomers they own 63 percent of the private businesses in the United States. They are vast owners of these small and intermediate size businesses. And 70 to 80 to 90 percent of their wealth is tied up in the value of their business. And of these business owners half of those are going to be selling or transferring their businesses in the next five years. So the unique thing about this market is that they don’t have time to wait for another up cycle. Whereas you may have if you’re walking along in your 30s and 40s and maybe 50s cycles go up and down. But in this case just strictly due to the window, the inevitable window that’s out there, these business owners don’t have that option. They’re going to be kind of forced into a transfer or sale position over the next one, two, three years because it’s inevitable.

John: I know that we had some clients that wanted to sell probably around the 2008 cycle right before it went south and then they got stuck in there for the next five years. Ultimately a lot of them came out stronger, the ones that did whether it they came out a lot stronger. But definitely when they came out they were ready to make a sale before … they weren’t going to wait for the next cycle. It really speaks to what you’re talking about-

Dan: Understand.

John: They were thinking well we made it through the last period and we’re going to make it count during this window.

Talking about selling businesses, especially people that have private businesses and they’ve been running it their heads down a lot of times so they haven’t seen a banker about maybe selling their business but they probably have a very good business and they often get an unsolicited offer from maybe a strategic partner that they deal with or maybe a private equity company. What are some of the concerns there because a lot of times they just want to take the deal because it’s there.

Dan: Well first of all it is very exciting to get an offer and for a business that you’ve been running, that’s your baby and you receive this unsolicited offer that comes in over the transom. You weren’t expecting it and like you say it could be from a strategic player, it could be from a competitor or it could be even from a private equity financial concern. One of the main concerns about receiving an unsolicited offer, and I’m sure that often Valerie you sometimes have clients maybe who are walking in your door saying “What do I do?” It’s very important to counsel them. And one of the things that they don’t need to do, they don’t need to rush into signing a letter of intent. And in quotes, in big letters there it says “Non-binding letter of intent.” Don’t believe it. There are provisions in that letter of intent that are binding. Maybe the price is not binding but there are other provisions in there that can really hold the deal up. One of the main concerns is that by signing a letter of intent, a non-binding letter of intent, is that you’re going to take your company off the market maybe for as long as six months. And it could be a disastrous turn of events to not be in a position to enter into negotiations with other interested parties who may come in during that six months’ time period.

Typically owners if they’re not prepared they’re not prepared for that onslaught of the due diligence request that we talked about earlier because all of a sudden now the seller is going to start to receive requests for reams and reams of data that the seller is not prepared to respond to. And also they’re not going to have their systems in place. They’re not going to be prepared to enter into that non-binding letter of intent.

John: And we see this.

Valerie: I was about to say I had a client who came in who was a family owned business, it was one with sisters and parents and so forth involved. And they’d gotten an unsolicited offer. Some of the family members were very excited, some of the family members were not. They thought it should be more, they did sign a letter of intent very quickly and then thought well maybe we should engage counsel. And it was a little bit late by that point in time for us to come jumping in.

Dan: Exactly.

John: I’m glad that you raised this and I’m glad that you talk to your clients about it because it does say non-binding and it does seem very innocuous but there is a lot of things that we once it’s inked we struggle to undo. For instance maybe it’s structured in a very tax inefficient manner so they’re not maximizing their exit and we’re locked into that at that point or maybe it anchors a value and they planned on granting some stock or some sort of ownership to other employees in the business. And now we’re locked into a value and it has consequences, tax consequences to the people they now want to give some equity to. A whole bunch of things that we can do pre signing but we’re sort of boxed in once it is signed. So I’m glad that you raised that.

So you mentioned early on the Emergency Operations Plans or what to do if someone were let’s say to get sick or there’s an immediate need of someone else to fill shoes. Can you tell us a little bit about what you meant by the Emergency Operations Plan?

Dan: Right. An Emergency Operations Plan is strictly is a very simple document. It’s only maybe two to four pages but it really outlines how the company is going to operate in the absence of a key owner operator in the business. And I like to use the beer truck syndrome. What if Joe or Mary were driving down the street and all of a sudden they got into a car accident and the prognosis was that OK they were going to be out of commission for six months. What would happen to the business the next morning and over the next few weeks? An Emergency Operations Plan is put into place to help make sure that there’s actually going to be a business to come back to. I hate to be so callous and say that if the beer truck took you out okay, that’s actually simpler from the business operations standpoint because typically there are insurances that come into play and those types of things but if you’re laid up in a hospital unable to communicate and function for a period of months then how are you going to make sure that that business continues?

So an Emergency Operations Plan is exactly that. It’s a document again like I said, it’s like typically two to four pages. What it does it outlines who is responsible basically for running the business, who can make decisions on hiring, firing, who can order the approval levels needed on writing checks or purchasing materials and those types of things. But it outlines how the different aspects are going to function and upon the idea that an individual is going to come back to actually run the company at some point. If it rolls along where that individual is not able to return then also Emergency Operations Plan would start to outline maybe who potential buyers are of the company, who would you retain, suggest to retain in the way of an investment banker or a business broker to handle the sale of the company. So you need to start putting these types of provisions out there just in a what if situation.

And you take that document and you don’t put it into a safe deposit box because a safe deposit box oftentimes is not available to other parties unless there is a severe death type situation. And even then you may be weeks or months before that can happen. So you need to take the Emergency Operations Plan, put it with a trusted adviser, with an attorney, with a family member who can then literally pull it out of a drawer and say “OK these were John or Mary’s wishes for how the company is going to operate in their absence and they’re planning on coming back.”

Valerie: I have to say John I don’t think I’ve ever seen a company with an Emergency Operations Plan. I’m trying to think of anybody in my experience that I’ve actually seen had that sort of transition planning in place.

John: That would be good. That would be a very useful thing because it is not covering the legal things that we cover, as you mentioned it would almost be better if they died because there’s insurance, there’s buy/sell provisions. This is operations, nuts and bolts, keeping it going.

Dan: Exactly.

John: We talked about one of the things that you help companies with is of course the pre-sale activities and also post-sale integration. I know you’re a big proponent of transition teams within a company. What is a transition team?

Dan: Yes. A transition team is a whole collection of professionals that that work inside the company as well as outside the company. The business is about to go into a very complex operation here in making a transfer of ownership owned to a third party, in to maybe a management team that’s handled internally. But you have to start looking at that team and oftentimes we come in as the quarterback of the team. We don’t have all the team members because members of that team would include everything from wealth advisors to attorneys, investment bankers, accounting firms, CBAs, the insurance specialist, the commercial banker, the tax specialist, and as I had mentioned earlier that family dynamics coach who maybe kind of keep things together from the family standpoint. So it’s pulling together a team that can address all the issues that are about to be encountered in going through that process. You’ve got a lot of tax planning, a lot of legal compliance. You’ve got insurance and intellectual property issues that come up. You’ve got H.R. and succession plans that need to be put in place.

There’s a whole list of things that are a one time occurrence but you need that team to be in place and it’s preferably that team needs to be in place … we had talked earlier about when do you begin exit planning. It’s almost critical that exit planning take place and I would say at least two years out prior to the transition, the sale date, because from a tax standpoint there are a lot of things that need to be put in place that you cannot to do at the 11th hour. You can’t go over and try to change things according to a tax structure one month away from closing, that is just not going to fly. Estate planning, those things need to have time to get in place and to be effective over a time period in order for them to be viewed by certain compliance and legal departments out there as being actual issues that can hold up.

John: I like the word team too because it really does need to be a team. I think the best transactions we’ve worked on are ones where there’s an open line of communication. I love it when they start off a deal with a kick off introducing the whole team so that you know exactly who’s running what because on some other deals it’s been a little bit of the team has not been linked. And then people are running independently and that’s just a recipe for disaster.

Dan: Right. Exactly.

John: What about the internal transition team for the company?

Dan: It really kind of depends. You have kind of two different extremes. You may have one situation where you have a business owner who wants the upcoming transition to be handled extremely confidentially and is needed to clarify this upfront. If that owner is so concerned about key management team members inside the company well first of all you need to lock up certain individuals on employment agreements and those types of things but you need to really position that company in a very confidential manner. In that case then you’re depending almost totally on your external team to move the process along.

Now if you have an organization to where OK it’s public knowledge or at least knowledge of the management team, the senior management team, and maybe individuals inside the company where it’s recognized that the business is going to go through a transition and then you can start to pull in other key management team members inside the organization and make them a part of the process. So it is really depending upon the wishes of the seller.

Some of the sellers that we run into they would rather go into a negotiated transaction with a strategic buyer or with a private equity firm, keep it very quiet and also probably not get top dollar for their company but they recognize by going in with a quiet transaction, negotiations held, so that they are protecting their team and their team members after the deal is done, they are very much willing to go that route as opposed to jumping into an open auction environment where it’s going to be definitely public knowledge that the company is for sale and that’s why you have these various parties traipsing through the office and the facilities looking at everything that’s going on.

John: Have you found change of control bonuses to be beneficial for incentivizing some of these key employees who sometimes are putting themselves out of a job, right?

Dan: Right. Yes change of control bonuses, extended stay bonuses for locking in certain key individuals to stay and perform according to certain standards for a certain time period, six months to a year to two years after the deal is done, very important.

John: Yes, absolutely. Entrepreneurial business owners typically are notoriously independent. That’s why they’ve gone out and they’ve become entrepreneurs themselves is they sort of think for themselves.

Dan: They don’t listen to anybody.

John: Yes. But that’s not your suggestion of course. You mentioned earlier that people need an advisory board, tell us a little bit about that.

Dan: Right. What I mean by an advisory board is different from a Board of Directors because an advisory board they offer suggestions, they offer non-binding recommendations about which direction to go, how to perform and move in certain markets or address certain internal issues. Now the advisory board as the process moves along it can be made up of different individuals and oftentimes the complexion and the composure of an advisory board will change. This is where with our subject matter experts and a lot of these are retired, semi-retired business owners and individuals who have had specialties in different areas like I.T., H.R., supply chain, et cetera. We can bring those into the advisory board if they’re needed to make a particular push through improving a certain functional area inside their company. So the advisory board will sit there as the quarterback kind of just making sure that all the bases are covered then move things along.

Now the key about an advisory board is having that independent third party, I may have mentioned this earlier of tapping the business owner on the shoulder and just making sure that things are moving along and that’s really the function of the advisory board over a period of time.

John: How do you make sure that the advisor … in addition to the independent third party but how do you make sure that an advisory board serves its purpose? Because some things that I’ve seen as a Board of Directors they got a little bit of stick behind them because they can often fire a President. But in this case the President is probably the owner and the advisors don’t actually have firing authority over this person so they’re serving sort at his or her leisure. I mean how do you make sure that it’s really functional and hold them accountable?

Dan: Well at the end of the day it’s really depending upon the management style and the reception or the receptivity of that business owner to outside ideas. As we indicated earlier these are typically very headstrong determined individuals but probably the reason they’ve been successful is that they have listened to people before who have told them things that they didn’t necessarily like to hear. But they go back and sleep on it a couple of days and it’s like “Well what this individual said was pretty much on target and I need to kind of move in that direction.” So it’s a lot of not necessarily congenial but it’s a lighter weight type involvement than being on the Board of Directors where you can in some cases as you say have a hammer in your hand.

John: Right. If you’ve gone through and you’ve helped everybody on a presale activities and we get successful sell, they go through, the bottles are popped, everybody’s celebrating-

Dan: Everybody’s happy.

John: Yes, everybody’s happy, at least for a moment. At that moment. Money’s exchanged. What’s life like after that?

Dan: Well we like to draw a scenario of like the Monday morning after the celebration dinner is held and everyone walks into the office going “What do we do now?” And that’s the big question. So from a consulting standpoint it is very important to have a plan and communicate that plan. There are a lot of questions that are coming up and the initial question that employees and members of the companies, the companies on both sides, both the acquired and the acquiring company their initial question is “What effect does this have on me?” That’s an overriding concern. What is extremely important is to communicate with the staff, with the team members and be very much upfront in saying that ‘We don’t have all the answers today. We will keep you informed as this process moves along.”

And it’s also very important that there be given some pre-thought to the merger integration process before the deal is done. We really encourage that when the probability of the deal is about 75 to 80 percent pull the executives in from the acquiring company and if it’s kind of known within the company to be acquired to pull those executives into a joint session and let’s have a merger integration strategy session of how are we going to put these different pieces together. We may have facilities that are located in various locations. How are they going to merge together. We may have different systems. What’s some thoughts as far as pulling these things together. So it’s very important to have that discussion pre-merger if you can have it.

And it’s also very important on the merger integration aspect of it, therefore the seller, to be engaged in the merger integration activity. In saying that there are no all cash deals. I don’t think I’m too far off track in saying that is that the seller doesn’t walk away with 100 percent of the cash in his or her pocket on day one, that typically does not happen. It may happen in 5 percent of the instances out there but typically not. There are all kinds of earn out provisions. There’s seller loans, maybe there’s stock. So that business seller is going to be tied to that merged entity for possibly several years. It can be as little as two years in an earn out position or if it’s stock position it can be until that company has their own liquidity event before they can actually see what’s going on.

But also keep in mind that for sellers it’s very important to get them involved in the integration effort because they would like for their team members who have been with that seller for maybe even 15-20 years to be very actively involved in that integration process because then the owner can push those individuals forward as far as being responsible members of the management team of the buying organization. And that in itself has several high points to it in that as a seller if you have your old management team in place and then a couple of years you get a phone call that says “Hey Joe, you kind of need to know what’s going on over here. I know you have a big earn out situation and you have some extended payments that are due but you may want to give so-and-so a call there just to kind of check up on things.” And it’s very important to have that type of conduit and that type of communication ability from some of your old management staff who is now part of the new organization going forward.

John: This has been very fun, very educational.

Dan: Thank you.

John: And very in line with our experiences so this is all great advice. We loved it. So Dan thank you for-

Dan: Well thank you so much and I thoroughly enjoyed it. And thanks for the questions and the rapport going around the table here. I think it’s been very engaging.

John: If people want to reach out to you what’s the best way they can get in touch?

Dan: Oh just go to PMI as in post-merger integration, PMI Advisors,, and you can read all about us there.

John: Thanks Dan.

Dan: Thank you.

This has been In Process, conversations about business in the 21st century. Presented by Trusted Counsel, a corporate and intellectual property law firm. Are you interested in being a guest on our show? E-mail our show producers at For more information on Trusted Counsel please visit

About Moye White LLP

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