Selling Your IT Business: Valuation, Finding the Right Buyer, and Negotiating the Deal

241 Pages·2006·0.94 MB·English

by  Robert J. Chalfin

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Selling Your
IT Business
Valuation, Finding
the Right Buyer, and
Negotiating the Deal
Robert J. Chalfin
John Wiley &Sons, Inc.
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ch00-fm_4573.qxd 11/3/2005 6:48 PM Page i
Selling Your
IT Business
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ch00-fm_4573.qxd 11/3/2005 6:48 PM Page iii
Selling Your
IT Business
Valuation, Finding
the Right Buyer, and
Negotiating the Deal
Robert J. Chalfin
John Wiley &Sons, Inc.
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This book is printed on acid-free paper.
Copyright © 2006 by John Wiley & Sons, Inc. All rights reserved.
Published by John Wiley & Sons, Inc., Hoboken, New Jersey.
Published simultaneously in Canada.
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Library of Congress Cataloging-in-Publication Data
Chalfin, Robert J.
Selling your IT business : valuation, finding the right buyer, and negotiating the deal /
Robert J. Chalfin.
p. cm.
Includes index.
ISBN-13: 978-0-471-74076-6 (cloth/cd-rom)
ISBN-10: 0-471-74076-4 (cloth/cd-rom)
1. Computer software industry. 2. Computer service industry. 3. Information
technology—Economic aspects. 4. Sale of business enterprises. 5. Business enterprises—
Valuation. 6. Business enterprises—Purchasing. I. Title.
HD9696.63.A2C525 2006
338.4′70053′0688—dc22
2005019912
Printed in the United States of America
10 9 8 7 6 5 4 3 2 1
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To my wife, Debbie,
my partner in life and my heart’s feast
To our children, Risa and Benjamin,
who embody our wish list and keep us laughing
To my parents, Shirley and Joe,
who gave me the gift of unconditional love which allowed me to pursue my dreams.
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Contents
Acknowledgments ix
Preface xi
chapter 1 What Buyers Are Looking For 1
chapter 2 Why Sell? 11
chapter 3 Types of Buyers 19
chapter 4 The Selling Memorandum 25
chapter 5 Attracting and Retaining Key People 41
chapter 6 Financial Metrics 51
chapter 7 Your Board 71
chapter 8 Marketing Your Business for Sale 77
chapter 9 Valuing Your Business: An Introduction 87
chapter 10 Valuation: Book Value of the Stock and Financial
Condition of the Business 103
chapter 11 The Company’s Earnings Capacity: Profit and
Loss Statement; Dividend Paying Capacity,
The Size of the Block of Stock to Be Valued,
The Market Price of Similar Stocks 115
chapter 12 Methods of Determining a Business’s Value 125
chapter 13 Confidentiality: An Introduction 141
chapter 14 Confidentiality: Limiting Data Dissemination and
Preparing Confidentiality Agreements 149
vii
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viii contents
chapter 15 Letter of Intent 161
chapter 16 Due Diligence 167
chapter 17 Forms of Acquisition, Contract of Sale, Utilization
of Attorneys and Certified Public Accountants 189
chapter 18 After the Sale 207
appendix Online Resources 211
Index 221