In this roundtable interview for Smart Business Network, Brian Davis, Clearview’s Managing Director and CEO, joined three other executives to talk about how the last two years have impacted the art of acquisitions and what to be prepared for today. You can view the entire discussion via the YouTube video below. Here are some highlights.
Brian: There have been some challenges, but there were some positives, too. When it comes to getting stuff done in this environment, it’s feasible.
There are a few things that you miss out on when you can’t be face to face. That amazing skill of reading upside down what’s on somebody’s desk, you just don’t get to deploy that skill when you’re not meeting face to face. So you’ve got to figure out other ways to determine the quality of the information you’re getting.
There are ways to use technology, such as:
But there are also other ways to figure things out. For instance, if I make a request, I look at how many emails went back and forth before the answer came back. That’s going to give me a good indication of the process behind the scenes and an idea of how good the information is that I’m receiving.
It’s an art, not a science - the feel and flow, those sort of things. Sometimes you’ve got to paint with a different medium or different tool. You’ve got to figure out a way to do those things without being face to face. And those are the things that we’ve had to get creative doing.
Brian: This is not new, and certainly not new for us. We have a very robust SALT (State and Local Tax) practice that is not just local to the Mid-Atlantic, it’s national and frankly, I’ll lump in Canada.
I think buyers over the last 5-10 years have become more aware as states have become more aggressive. When it comes to SALT, the liability transfers a lot of times. So the states are looking at the head lines and they’re seeing who’s acquired what and they’re poking around to see what’s there. I think the issue is more in the forefront now for a lot of other folks, but for us, it’s something we’ve always addressed.
The reality of SALT is that words matter. Contracts drive the visibility of things. We have to get in and look at those contracts and see what the actual words are in those contracts and see how things are being handled.
The one thing I can tell you about SALT is that it’s extremely complex, and it’s so complex that I can virtually guarantee you right now that no company is fully compliant with State and Local Tax issues.
What we’re looking for is material non-compliance. Whether you call them needle-movers, game-changers, or what have you. When you do it the right way, you can have adjustments, escrows, and sometimes you have to run for the hills because the liability is too big.
We take a very pragmatic approach to SALT and get the right answer and put it out there for discussion and decision-making.
As an example, we were doing some due diligence for a SaaS company in Illinois and found out they were registered in Illinois, but probably should have been registered in 35 other states. And that was just a game-changer. The liability was too big, too unknown, and the deal didn’t go through.
Whereas we’ve done other projects where you’re dealing with rent, and it’s not being taxed properly, and you just figure out what you think the liability is and you put that out there and decide what you want to do from there.
SALT issues are becoming more apparent for the buyers, and are really becoming more apparent for the sellers, but unfortunately, it’s a little too late for them.
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