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Review the assigned article, “Keeping the Sale of Your Private Company on Track.” What are the common preparation mistakes sellers make in preparing to sell their company? Which one of those mistakes is most likely to be fatal? Explain your answer.
Keeping the Sale of Your Private Company On Track. (2007). Financial Executive, 23(3), 40–42.
ommon preparation mistakes sellers make when they are preparing to sell their company involve not conducting thorough due diligence, not exploring all options for sale, failing to understand the tax implications of a sale, and allowing emotions to impact decision-making.
The mistake which is most likely to be fatal would be not conducting thorough due diligence. When a seller does not conduct proper due diligence and does not understand the financial structure of their business or any potential liabilities, this places them at risk of making decisions that could have substantial negative consequences if the buyer discovers hidden risks after the sale is complete.
If such risks exist, buyers may back out of an agreement or attempt to renegotiate terms; both scenarios can result in delays or even completely derail the process. In some cases, the seller may even be liable for any losses incurred by the buyer due to undisclosed risks. Therefore, it is essential that sellers conduct thorough due diligence before engaging in a sale process to ensure they have an accurate understanding of their business and its financial structure.