Pitfalls to Avoid in a Company Sale: Forgetting About Collection Licenses

June 30th, 2008

During the due diligence process, issues can arise that have the potential to jeopardize a merger or a sale.

One issue that has caused closing and funding delays – and in rare cases has squandered a sale altogether – is the transfer or renewal of state collection licenses from the seller to the buyer. This issue is critical, especially for non-industry buyers, yet it is often overlooked until after due diligence begins. Non-industry buyers are typically not aware of the nuances involved in obtaining state licensing, including how long it takes to transfer existing licenses and what risks they are exposed to while they are conveying.

This issue needs to be addressed early in the due diligence process. Due diligence is the investigative stage when the buyer reviews and confirms confidential information about the company prior to closing. This process generally starts after the buyer and seller have executed a non-binding letter of intent that details the purchase price and terms of a transaction, and ends at a closing when a definitive purchase agreement is executed and funds change hands.

If the transfer or renewal of licenses in the name of the new owner is not addressed early on in due diligence, the seller risks a delay in closing or may face receiving a partial payment of the purchase price until all of the licenses have fully conveyed to the buyer.

To avoid these delays, the buyer and seller should first determine the length of time needed to get licenses in place for the new owner. A timeline should then be created for conveyance, ensuring that all applicable licenses are renewed under the new owner/company name, and that they adhere to various strict state guidelines. An experienced M&A advisor can help identify how to address this issue so it doesn’t delay a closing.

Comments are closed.

LATEST BLOGS

Family Vacations: A Time to Unplug from the Digital World

August 17, 2017

As I approach the half century mark, I find myself appreciating family vacations more than ever before. Last week, we went on an Alaskan cruise in which internet access was not provided unless the passenger paid separately for it. I quickly learned how precious family vacation has become. Were you able to pull yourself away from the internet on your family vacation this year?....

» see this post    » all posts


Large Healthcare Market Participants Continue to Endure

August 15, 2017

As part of our KG Prime market intelligence series, we recently examined and retrieved data from the largest players in the U.S. healthcare market. After doing so, we suggested various takeaways for the ARM and RCM industries based on company-specific and market-wide data. ....

» see this post    » all posts


Earn-outs: A Necessary Evil in Business Transactions or a Valuation Bridge between Buyers and Sellers?

August 10, 2017

Most business owners who are contemplating the sale of their business tell us they are vehemently opposed to a transaction structure that includes an earn-out component. When asked why, the typical answer they give is that earn-outs never materialize. So, why do earn-outs exist?....

» see this post    » all posts


RECENT ANNOUNCEMENTS

Kaulkin Ginsberg Announces the Acquisition of Remit Corporation by Eastern Revenue

August 17, 2017

Kaulkin Ginsberg Company announced today the acquisition of Remit Corporation, a well-established regional collection agency founded by Harry Strausser III, and based in Bloomsburg, Pennsylvania, by Eastern Revenue, Inc.....

» see more




Mike Ginsberg to Discuss Trending Topics at ARM Events this Fall

August 15, 2017

Join Mike Ginsberg at the Debt Connection Symposium and the Receivables Management Conference this fall as he discusses important issues surrounding the ARM industry.....

» see more




Kaulkin Ginsberg Moves Its Market Intelligence Online

June 8, 2017

Kaulkin Ginsberg is changing the way busy owners, executives, and senior leaders access strategic market intelligence with the launch of KG Prime. KG Prime is a comprehensive and easy to use web-based service that provides users with economic, market segment, and other forms of strategic research.....

» see more